Why Your Savings Matter When Applying for a Loan

When it comes to getting a loan, it's not just about having a steady income and a good credit score. Your savings also play a crucial role in determining whether or not you'll be approved for a loan. But how much do your savings really matter, and what do the numbers say about their impact?

Let's start with the facts. According to recent data from the Australian Bureau of Statistics, the average Australian household has about $34,000 in savings. This may sound like a decent amount, but when you consider that the average Australian mortgage is around $601,797, it's clear that most people could benefit from having even more in the bank.

So, how much should you aim to save if you want to increase your chances of getting approved for a loan? Well, that depends on the type of loan you're after. For example, if you're applying for a personal loan or a credit card, your savings may not be as critical as your credit score and income. However, if you're looking to buy a property or invest in a business, your savings can make all the difference.

Having a sizable savings account demonstrates to lenders that you're financially responsible and capable of managing your money effectively. It also provides a safety net for unexpected expenses and shows that you're able to handle any unexpected financial setbacks.

But how much of an impact can your savings really have on your loan application? 

According to a recent survey conducted by the Australian Securities and Investments Commission (ASIC), almost one in five Australians have been rejected for a loan due to a lack of savings. That's a significant percentage, and it highlights just how important it is to have a healthy savings account.

In addition to increasing your chances of loan approval, having savings can also help you secure a better interest rate. When lenders see that you have a substantial amount of money in the bank, they may be more willing to offer you a lower interest rate, as you're perceived as a lower risk borrower.

So, to answer the question of whether or not saving actually helps you with getting a loan, the answer is a resounding yes. Your savings play a crucial role in demonstrating your financial stability and responsibility to lenders, and can greatly increase your chances of being approved for a loan.

Of course, it's not just about having savings – it's also about managing them wisely. Lenders will look at your savings habits and want to see that you're consistently putting money away and not dipping into your savings unnecessarily. So, if you're serious about getting approved for a loan, it's important to develop good savings habits and keep your finances in order.