- Lenders need to see a consistent income over time, so being a new employee can make securing a personal loan more challenging.
- You can strengthen your application as a new employee by meeting all eligibility criteria, having a good credit history, or providing additional assurances like an employer letter or a secured loan.
Many lenders require that you've been in a job for at least a few months before applying for a personal loan. So what should you do if you have just started a new gig and need to take one out?
It can be challenging as lenders need to ensure you have a stable, regular income to manage repayments. Even if your new position offers a higher salary than your previous one, you may still be considered a higher-risk borrower. However, there are ways to increase your chances of approval.
Why does the length of your employment matter when applying for a personal loan?
If I’m earning enough, why should it matter how long I’ve worked there?
When you apply for a personal loan, the lender will assess your application to ensure that you can afford to repay the loan. They will look at your income, but not just the dollar figure.
Lenders need to ensure you have a consistent source of income so you won’t run into any trouble making your loan repayments.
Many lenders require you to be in your current job for at least two or three months before you apply.
This way, they can see how you manage your current income and expenses over a period of time, and whether you can add an extra expense on top of your current obligations.
Thankfully, there are still some lenders out there that don’t have a strict requirement for the length of your employment - especially if you’re moving from one full-time job to another with consistent pay throughout.
It pays to check the lender’s eligibility criteria beforehand to save you time and keep your credit history untouched.
Savings.com.au’s two cents
While you could potentially still secure a personal loan as a new employee, it’s important to make sure your lender is cool with it. Some lenders won’t care, while others will - either way, it’s important to know who’s who in the personal loan zoo.
There are a number of personal loan providers in Australia, so if you’ve been a reliable borrower in the past and you’re able to service your new loan, you shouldn’t run into much trouble. Still be sure to do your research and know all your options before you submit your application.
How to strengthen your application
Regardless of whether your lender has a specific requirement or not, being a new employee and applying for a personal loan will likely put you at a disadvantage. However, there are things you can do to strengthen your application to increase your chances of approval.
Meet all eligibility criteria
One of the most important things you’ll need to do when applying for a personal loan - whether you’re a new employee or not - is meet all of the lenders' eligibility criteria. While it can vary from lender to lender, standard personal loan requirements include:
- Being at least 18 years old
- Being an Australian citizen or permanent resident
- Being able to demonstrate consistent income that can meet loan repayments
- Having a good credit history (or at least a credit score acceptable to the lender)
- Providing proof of identity and proof of residence
- Having an active Australian bank account
- Providing proof of residence (e.g., utility bills, rental agreement)
If you want to snag a decent interest rate, you’ll need to have a credit score that matches up. Your lender will also look at your bank statements to see your savings habits and your past financial behaviour - so be sure to demonstrate your trustworthiness as a borrower before you apply.
Get a letter from your employer
One of the biggest risks of being a new employee and applying for a loan is your job security. Oftentimes, you’ll have a probationary period - a big risk for a lender. Consider getting a letter from your employer either stating you have no probationary period for your position or giving you a glowing recommendation to put your lender’s mind at ease.
Apply for a secured loan
Having security on your loan can also reduce your risk to the lender. There are two main types of personal loans: secured loans and unsecured loans. A secured personal loan requires that an asset is offered as collateral, while unsecured loans don’t require this. If your lender has an added layer of security (literally), your risk as a borrower can be minimised.
Have a good credit history
As we mentioned, you’ll probably need a good credit score if you want a good interest rate on your loan. But having a good credit history can also increase your chances of being approved. This is because it demonstrates to the lender that you have been a responsible and reliable borrower in the past, and should be one in the future.
In the market for a personal loan? The table below features unsecured personal loans with some of the lowest interest rates on the market.
| Lender | Car Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Interest Type | Secured Type | Early Exit Fee | Ongoing Fee | Upfront Fee | Total Repayment | Early Repayment | Instant Approval | Online Application | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.24% p.a. | 6.95% p.a. | $389 | Variable | Unsecured | $0 | $10 | $495 | $23,334 | |||||||||||
5.95% p.a. | 5.95% p.a. | $386 | Fixed | Unsecured | $0 | $0 | $0 | $23,171 | |||||||||||
5.76% p.a. | 5.76% p.a. | $384 | Fixed | Unsecured | $0 | $0 | $275 | $23,066 |
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What are your other options?
Since applying for a personal loan as a new employee can be a bit riskier than normal, are there other avenues that may suit you better? There definitely could be but, of course, this will depend on what you’re planning on using your personal loan for. Let’s explore some of your other credit options that you could consider.
Credit card
A credit card could be easier to obtain, but keep in mind interest rates are likely much higher than with a secured personal loan, with some credit cards attracting interest rates of 18% p.a. or more. If you pay off your balance within the interest-free period, then no problem, but if you let it run loose, you could face steep and spiralling repayments.
Buy now, pay later (BNPL)
BNPL can be a useful alternative, particularly if you prefer paying for purchases in instalments instead of taking on a traditional loan with interest. Accounts are usually easy to open, and apps are user-friendly. But BNPL limits are typically much lower than personal loans or credit cards. Monthly or late fees, when annualised, can also rival personal loan interest rates.
Wait it out, spend within your means
While an unsexy option, patience is a virtue. Either waiting to save money, or waiting until you’re in your job for longer can be beneficial. You don’t need to be in your job for years and years before you apply; just a few months is generally enough with most lenders.