How Do You Qualify For A Personal Loan For Your Home Improvement?


Most people have been forced to remain indoors since March 2020, thanks to the outbreak of COVID-19. This has compelled everyone to get a closer look at their home. 

You may have developed the itch to upgrade the kitchen, redo the bathroom tiles, or even add a home office since you are uncertain how long you will be stuck working from home. With interest rates on personal loans being the lowest they have been in the past decade, it might be time to consider taking a personal loan for home improvement projects. 

Australia saw an increase of 5.6% in alterations and additions to residential buildings in November 2020 alone. Thanks to the Federal and state housing incentives and low interest rates, the demand for residential alterations has seen a frenzy of activity since late 2020. 

If you want to be part of this home renovation hysteria, but are wondering how to finance the project, the simple answer is a small personal loan for home improvement. 

Personal loans are no longer the back-shelf products that bankers tried to steer customers away from. They are the latest fad in the loan market, and bankers are more than willing to give them out. 

Of course, there are certain conditions you need to meet to qualify for a personal loan. Here’s how you can qualify for a personal loan.

Your Income

The first item that the lender will consider is whether you have a steady income stream and whether it is enough to cover your loan amount after removing other expenses. Banks can have a minimum income requirement or look at each application on a case-to-case basis. Regardless, you still need regular income to qualify for a personal loan. No banker will lend to you if you are unable to provide proof of steady income. 

If you have a job, you can provide your pay stubs as proof of income. If you run a business, you can provide your income tax returns, and if you are a professional, you can provide your bank statement as proof of income. 

Your Debt to Income Ratio (DTI Ratio)

Now, you have a regular income that can cover your loan payments, but the bankers also need to know if you have other loans, credit cards, or any other forms of outstanding debt. You will have to make sure that you can cover your expenses, previous debt payments and still have enough left to pay your new loan. 

Therefore, bankers will calculate your DTI ratio. Ideally, this ratio should be about 36% or less for you to qualify for a personal loan.

Credit History and Score

Your credit history will be significant when it comes to borrowing any loan. Whether it haunts you or heartens you will be based on your financial wisdom. 

If you have ensured that all your debt was paid on time and have not missed or delayed a single payment, then you will have an excellent credit score. Bankers will be lining up to give you more credit and super-low rates. 

However, if you missed a payment or two, you may still qualify for a personal loan, albeit at a higher interest. If you have more than a few missed payments, then you may not qualify for the loan at all. In such cases, you can look at ways to clean your credit report and improve your score over time. 


The banks need to be sure that you are an Australian citizen before they can lend to you. This allows them to hold you accountable under Australian laws. Even non-citizens can apply for personal loans, provided they have valid visas and meet the residency criteria of the banks. 

Therefore, if you are in Australia on a student visa, it may be difficult to get a personal loan, but when you have a long-term work permit, you can easily qualify for a loan to renovate your home. 

Disclose the Purpose of the Application

While personal loans are discretionary, a personal loan for home improvement can be expedited over other personal loans. Therefore, it is best to disclose the purpose of the loan application to qualify for the loan. 

Personal loans cannot be used to fund higher education, for business purposes, illegal activities, gambling, and purchase of land or securities. Therefore, the qualification process requires you to disclose why you are applying for the personal loan. 

Get Permission from Local Authorities

In Australia, you are required to get permission from the local authorities before you make any alterations to your home. 

A building permit is mandatory for any structural changes to the house. Therefore, you need to get a valid building permit before applying for a personal loan to renovate your house. Otherwise, your application will be disqualified. 

Prove That You Are an Adult

Only adults can carry out transactions such as applying for personal loans. Therefore, you need to prove that you are at least 18 years of age to qualify for a loan. You can submit any government identification document as proof of age. 

Pre-qualify Using a Calculator

Most banks have personal loan calculators, which ask for a few details and help ascertain your eligibility for the loan and estimate your monthly payments. You need to enter details like the amount you need, the repayment period, your credit score, and repayment frequency. 

Based on this information and the bank’s terms and conditions, the calculator will pre-qualify you for the loan and give you an estimate of your payments. 

The benefits of prequalification are that you get an estimate of your monthly payment, and there is no hard credit inquiry, thus not impacting your credit score. Therefore, it is recommended that you always pre-qualify for a loan before you apply to the bank. 

Expensive home renovations have become easier, thanks to personal loans at low interest rates. You can qualify for the loan using the above steps and make the necessary upgrades to your home. 

As long as you are completely honest about your credit score, financial status and purpose of the loan, and can provide documentation, you will be able to get the loan amount credited to your account without any hassle.


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