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If your situation is not straightforward, we can help you work through your loan options and find finance that fits.
At A Glance
- Pre-approval can give you an indication of what you may be able to borrow.
- It can help you shop within a more realistic price range.
- Problems are easier to deal with before there’s a purchase hanging over you.
- It can reduce the risk of committing to something before you understand the finance position.
- Pre-approval isn’t final approval and conditions can still apply.
Before Your Heart Takes Over
Humans are emotional creatures. We buy with our heart before we buy with our head.
You find the house, car, bike or whatever else you’ve had your eye on, and suddenly you can already picture yourself owning it.
Then the less exciting question shows up: Can I actually get a loan for this?
That’s the problem with shopping first and sorting the money out later. Once you really want something, it gets much harder to look at the numbers calmly.
The best time to find out whether the finance works is before you’ve mentally bought the new shiny thing.
That’s why I recommend going through the pre-approval process first. It’s an easy way to get a better idea of what may be possible before the pressure, emotion and urgency of a real purchase start getting involved.
Table of Contents
What Does Pre-Approval Actually Mean?
Pre-approval is basically an early indication from a lender that the loan may be workable based on the information they have at that point.
You’ll provide details about your income, debts, expenses and what you’re looking to borrow, and the lender checks whether the application fits within its policy and servicing rules.
The exact process and terminology can vary between lenders, with some using terms like conditional approval for similar early-stage decisions.
The important bit is that pre-approval is not final approval. There may still be conditions to satisfy, more information to provide, or the actual property, vehicle or other asset may still need to be accepted by the lender.
It Gives You a More Realistic Budget
One of the biggest benefits of pre-approval is knowing what sort of price range you should actually be shopping in.
Without it, it’s easy to base your budget on what you hope you can borrow, what an online calculator tells you, or what someone else with a similar income managed to get.
None of those accurately tell you what you may actually be able to borrow.
Once we’ve worked through your income, debts, expenses and the loan you’re looking for, you’ve got a much better idea of what may actually be achievable.
That means you can start looking at things that are realistically within reach, rather than finding the perfect one first and trying to make the finance fit afterwards.
Know What You’re Working With
The earlier we know what we’re dealing with, the more options we usually have.
Pre-approval can also help us identify issues you might not know are there yet, before we go ahead with a full application.
Maybe a lender won’t use all of your income the way you expected. Maybe an existing debt is cutting into your borrowing capacity more than you realised. There could be something on your credit file, a policy issue, missing documents, or simply a loan amount that doesn’t work once the numbers are tested properly.
None of that is especially fun to find out, but it’s much easier to deal with before you’ve already found something you want to buy.
Doing that work upfront can also help avoid unnecessary formal applications and credit enquiries. Applications for credit can appear on your credit report, and making several in a short period can work against you.
If we do find something on your credit report that needs attention, finding it early also gives you time to look at whether it can be corrected or dealt with before you apply.
Before You Commit to the Purchase
Finding something you want is one thing. Signing a contract to buy it is another.
Once you commit, there can be deposits, deadlines and other obligations involved. Whether you can simply walk away if the finance falls through will depend on the contract and any conditions attached to it. If you’re buying a used car, the vehicle and the transaction itself can also affect whether the finance goes ahead.
That’s another reason I’d rather have a good idea of where the finance stands before you sign anything.
Pre-approval still isn’t final approval, but it puts you in a much better position than committing first and trying to sort the money out afterwards.
Pre-Approval Isn't a Blank Cheque
Pre-approval is useful, but it doesn’t mean you can go out and buy anything up to that amount and assume the lender will fund it.
There can still be conditions attached, and the lender may need to check things like the property, vehicle or other asset you’re buying, any valuation requirements, updated documents, or whether anything in your financial position has changed.
So if you’ve been pre-approved for up to $50,000, for example, that doesn’t automatically mean every $50,000 purchase will be accepted.
Think of pre-approval as giving you a better starting position, not a free pass to spend right up to the limit.
When Should You Get Pre-Approved?
If you’re genuinely getting ready to buy in the near future, there are a few advantages to starting the process early rather than leaving it until the last minute.
The first is simply giving yourself enough time to get everything sorted. The more time we have, the easier it is to work through any issues, compare suitable options and make sure the numbers actually stack up.
These things can sometimes take longer than anticipated to arrange, and if there are delays along the way, it can be easy to miss a deadline or lose the purchase to another buyer.
Pre-approvals can also have validity periods and may need to be refreshed if too much time passes, so the exact timing depends on the lender and the type of loan.
If you’re not sure when to get started, feel free to reach out and we can talk through the timing with you.
What To Take Away
Pre-approval gives you something concrete to work with before you commit to a purchase.
With a bit of planning, you’ll have a much clearer idea of where you stand and what may be possible.
Most importantly, it gives you time to get things in order, which can be invaluable when you’re looking to buy the house you want, a car you really like, or maybe that new motorcycle you’ve been dreaming of.
If you’re planning to buy soon, let’s see what you may be able to get pre-approved for.
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.