Borrowing power, explained
Two lenders can look at the same payslip and differ by tens of thousands. Here is what sits behind the number.
The basic sum
A lender takes your income after tax, subtracts living expenses and existing debt repayments, and sees how big a loan the remainder can service. The loan is not tested at the rate you will pay. Under the banking regulator’s rules it is tested at that rate plus a buffer of 3 percentage points.
What counts against you
- Credit cards. Assessed on the limit, as if fully drawn. A $10,000 limit can cut borrowing power by tens of thousands.
- HECS and HELP. The compulsory repayment is treated as a monthly commitment.
- Buy now, pay later. Shows on statements and is counted as a debt.
- Car and personal loans. Counted at the actual repayment.
- Living expenses. The lender uses the higher of your declared figure and a benchmark for your household, and checks your statements against both.
Where lenders differ
- How much overtime, bonus and commission they count
- Whether casual or contract income needs 3, 6 or 12 months of history
- What share of rental income is used
- How they treat child support, family tax benefits and second jobs
- Whether they assess existing loans at the actual repayment or a higher notional one
This is why a decline at one bank is not the final answer.
How to lift yours
- Close or reduce credit cards you don’t need
- Clear small debts and buy now, pay later accounts
- Keep three months of clean, steady spending before you apply
- Have your latest payslips and tax return ready
- Apply with the lender whose policy suits your type of income
Questions people ask
Should I borrow the maximum?
Borrowing power is a ceiling set by the lender. What is comfortable for you is a separate question, and we talk about both.
Does my HECS debt stop me getting a loan?
No. It reduces the amount. For some borrowers close to paying it off, clearing it first can help, but not always. We run the numbers both ways.
General information, last updated November 2026. Scheme figures, lender policies and duty rates change, so confirm them before you rely on them.
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