Two people on the same income can be assessed very differently for the same loan. That is because serviceability is not a measure of what you earn. It is a measure of what is left over once your commitments and living costs are taken out, and whether that margin would still hold if conditions changed.
What goes into the assessment
- Income the lender will count. Salary is usually taken in full, while overtime, bonuses, rental income and business income are often discounted or averaged over time.
- Existing debts. Home loans, car loans, personal loans and buy-now-pay-later accounts all reduce what is left. Credit cards are generally assessed on the limit, not the balance you carry.
- Living expenses. Lenders compare the figure you declare with a benchmark for a household like yours and tend to use whichever is higher.
- A higher test rate. The repayments are checked at a rate above the one you would actually pay, to see whether the loan would remain manageable if rates rose.
Why results differ between lenders
Each lender applies its own policy on which income counts, how expenses are measured and how other debts are treated. The same application can therefore produce a different outcome from one lender to the next, which is why it helps to understand how your position is likely to be read before you apply.
Video transcript
Hi, I'm Jack Si from Australian Finance Service Solutions.
Serviceability is the lender's way of asking: after this loan, can you comfortably meet the repayments alongside everything else you owe? It's not just your income, it's your existing debts, your expenses, and how the lender stress-tests it against a higher rate.
If you want us to look at your situation, send us a message.
This is general information only and is not credit advice.
Want us to look at your situation? Send us a message or call 1300 968 888.
General information only, not credit advice. It doesn't take your personal circumstances into account.
Jack (Muyuan) Si is a Credit Representative (516785) of Buyers Choice Licencing Pty Ltd ACN 626 172 281 (Australian Credit Licence No. 509484).