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Good account conduct: Why it matters when securing a loan

Financial advisors and other finance professionals often talk about practicing good account conduct. But what does that look like? And why does it matter when applying for a loan?

Financial institutions use a simple spreadsheet to calculate if you can afford your new loan.

With new regulations that came into effect late 2021, there is greater scrutiny on your discretionary spending. Is this new – not really.

The Banks have a responsibility to ensure that when lending money to you, the last thing they want to do is place you and your family potentially in financial hardship.

It’s up to you to show you have your finances under control.

If you can show that you can manage your day to day income and expenses, this puts you at a major advantage when applying for funds. Account conduct is a major factors that they look at.

So, what’s “account conduct”?

This is how you could manage your bank account/s. Let’s take an example, say we’re working with a young couple applying for their first home for a city apartment. Their account conduct is excellent, below shows how they run their accounts (We are not suggesting that this would suit you, please speak to us directly for specific financial advise).

Focus is clear: Purchase first home within our budget.

  • Salary income into their individual accounts

  • Both transfer a percentage via an AP (automatic payment) to three accounts:

o Joint expenses account (rent, power, groceries etc),

o Savings and investment account – savings made weekly

o “Fun” and entertainment account

Do not own vehicles and make the use of public transport and Uber;

Besides student loans but otherwise have no other debt such as credit cards, Afterpay (or similar services) and no store cards.

Other than gym memberships & medical insurance, they do not have any additional subscriptions for entertainment services such as tv & movie streaming subscriptions, online gaming, music streaming subscriptions etc.

This arrangement makes it clear to a lender that the client is focused and have a clear understanding of their income and how to manage their expenses. This combined with making regular saving deposits shows to the lender they are financially responsible and are likely to be consistent with their mortgage repayments.

This is an example of what it takes to give you the best chance at securing your new home, clear focus.

Is it tough – absolutely – is it worth it, that’s your decision.

We think so and are here to help.


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