Need Finance?
If your situation is not straightforward, we can help you work through your loan options and find finance that fits.
At A Glance
- Your income is only the starting point.
- Existing debts and credit limits can reduce how much you can borrow.
- Living expenses and dependants also affect the calculation.
- Lenders test the new loan using their own servicing rules.
- Different lenders can give the same borrower different borrowing-capacity figures.
So, How Much Can You Actually Borrow?
So you’ve got a purchase in mind. That new thing you want is calling your name, telling you to buy it now.
Then you start connecting the dots and thinking: how much can I actually borrow?
That’s the part where the rubber meets the road.
The tricky bit is that there isn’t one universal formula that gives everyone a neat answer. Borrowing capacity isn’t simply your income multiplied by a set number. That would be too easy.
When I’m working it out, I’m looking at your full financial position, taking the details into account, and then seeing how different lenders are likely to treat the same information.
We approach it this way because two lenders can look at exactly the same person and come back with different answers.
Same income. Same debts. Same expenses. And a very different result.
Table of Contents
We Start With Your Income
You’d think earning $70,000 a year means a lender sees $70,000 a year.
Not necessarily.
Income is obviously a big part of working out how much you can borrow, but we’re also looking at how you earn it, how it’s paid, how long you’ve been earning it, and what a lender is prepared to use.
That can include things like:
- Salary and wages
- Casual or variable income
- Overtime, allowances and bonuses
- Self-employed income
- Rental income
- Other income a lender may be willing to use
This is where people can get caught out. One lender might be comfortable using all of a particular income type. Another might only use part of it, want a longer history, or apply different rules altogether.
Then We Look at What You Already Owe
Are you currently in debt? That’s fine, most of us are. It’s just something that needs to be considered.
A central part of working out how much you can borrow involves looking at the debts and commitments you’re already carrying. This helps us understand how those debts are being managed and how much of your income is already committed to repayments.
That can include things like:
- Home loans
- Car loans
- Personal loans
- Credit cards
- BNPL accounts and other ongoing commitments
Credit cards are a good example. A lender may look at the card limit, not just the amount you happen to owe today, and allow for a repayment against that limit when working out how much you can borrow.
That’s why someone can earn a strong income and still end up with less borrowing capacity than they expected. The income might look good, but the commitments sitting underneath it can make a big difference.
Ultimately, we need to see how much room is left in the budget to support the new loan you want to take on.
Your Living Costs Matter Too
Life is expensive, and for most people those costs don’t stay still.
Debt isn’t the only thing competing for your income. You still need enough money to live and leave some room in the budget.
So we also look at what it actually costs to run your household. That can include things like:
- Rent or existing housing costs
- Food and groceries
- Utilities and transport
- Insurance
- Childcare or school costs
- Costs relating to dependants
- Other regular household expenses
Someone can have a decent income and very little debt, but if most of that income is already being used to cover everyday life, there may not be much room left for another repayment.
Lenders will usually ask you to declare your living expenses, and they may also compare those figures against their own benchmarks or minimum assumptions.
For us, the aim is to get a realistic picture of what’s already leaving the household each month before we start adding another loan on top.
Then We Test the New Loan
Unfortunately, none of us have infinite money, so at some point the numbers have to line up with the loan you want.
Once we know what’s coming in and what’s already going out, we can add the new loan to the picture. The goal is to work out whether it still fits once it’s added to everything else already sitting in your budget.
The amount you’re looking to borrow, the loan term and the way the lender calculates the new commitment all become part of the equation. We’re essentially asking whether your income can support what you already have plus the new debt.
The figure used for servicing may also be different from the repayment you see advertised or eventually make.
For example, a lender may use an assessment rate that includes a buffer or apply other servicing assumptions when testing whether the new loan fits.
Why Different Lenders Can Give You Different Numbers
The difference often comes down to the finer details of lender policy and how the numbers are calculated.
One lender might use more of a particular income type, while another applies a haircut or wants a longer history. They may calculate existing loans and credit cards differently, use different living-expense assumptions, or apply their own servicing rules to the new loan.
Then there are the policy differences sitting around all of that. One lender may be perfectly comfortable with something another lender won’t accept.
Sometimes those differences barely move the needle. Other times, they can change the borrowing figure by a surprisingly large amount.
This is where a lot of the value of using a broker comes from. It’s not just putting your numbers into a calculator. It’s knowing which details could change the result, which lenders are worth looking at, and where your situation is more likely to fit.
The magic really is in the detail.
Can You Change How Much You Can Borrow?
Sometimes, yes.
And the biggest difference doesn’t always come from earning more money.
Depending on what’s holding the calculation back, reducing unused credit-card limits, paying out existing debt, or simply giving newer income or employment more time to establish can all change the result.
The loan itself can change things too. A different term or structure may produce a different servicing outcome.
So if the number comes back lower than you expected, it doesn’t always mean that’s the end of the road. The useful part is working out what is actually limiting it and whether there’s anything sensible we can do about it.
What To Take Away
How much you can borrow isn’t one universal number sitting there waiting to be discovered.
It depends on your income, the debts and commitments you already have, what it costs to run your household, the loan you want, and how a particular lender treats all of that.
That’s why one calculator or one lender can only tell you so much.
If you want to get a better idea of what may be possible for your situation, check your options with BrightCredit.
Tom is the founder of BrightCredit and a finance broker focused on borrowing situations that are not straightforward. His writing helps Australians understand credit, loans, and the details that can affect their borrowing options in a clearer, more practical way.