How Do Existing Loans and Debts Affect a Responsible Lending Assessment?

Are you already repaying a car loan, personal loan, credit card or buy now, pay later account? You may be wondering whether those existing debts could affect another loan application.

Having debt does not automatically mean your application will be declined. However, your existing repayments reduce the amount of income available for another financial commitment.

When we assess an application, we need to consider whether you could afford the proposed repayments alongside your existing debts and normal living expenses.

Your overall financial position matters more than simply the number of credit accounts you have.

How Do Existing Debts Affect a Loan Application?

Existing debts can affect a loan application because they reduce your available income and increase your regular financial commitments.

Under Australia’s responsible lending framework, regulated credit providers generally need to:

• Make reasonable inquiries about your financial situation.
• Make reasonable inquiries about your requirements and objectives.
• Take reasonable steps to verify relevant information.
• Assess whether the proposed credit contract would be unsuitable.

This means an assessment may consider factors such as:

• Your reliable take-home income.
• Your essential living expenses.
• Your existing loan and credit repayments.
• Outstanding debts and arrears.
• Relevant transaction history.
• Your requirements and objectives.
• Whether the proposed repayments could cause financial hardship.

Your debts are therefore considered as part of a broader assessment of whether another repayment is affordable for you.

Does Having an Existing Loan Automatically Mean You Will Be Declined?

No. Having an existing loan does not automatically prevent you from being approved for another credit product.

Two people with similar levels of debt can receive different outcomes because their incomes, expenses, repayment histories and other circumstances may be very different.

For example, you may have a manageable car repayment while still having enough income left after rent, groceries, utilities and other essential expenses.

Someone else with a similar car loan may already have several other financial commitments that leave very little room in their budget.

Meeting basic eligibility requirements also does not guarantee approval. We assess every application individually.

What Types of Debt May Be Considered?

You should accurately disclose your current financial commitments when completing a loan application.

Depending on the lender, product and assessment process, several different types of debt may be relevant.

Personal and Short-Term Loans

An assessment may consider:

• Your outstanding balance.
• Your regular repayment amount.
• How long the loan has left to run.
• Whether repayments are being made on time.
• Any overdue amounts.
• Any hardship or repayment arrangements.

Even a relatively small outstanding balance can have a meaningful effect on affordability if the required repayments take up a large part of your available income.

Car Loans and Other Vehicle Finance

Vehicle finance is generally a regular commitment that needs to be paid alongside housing costs, food, utilities, transport and other essential expenses.

When assessing affordability, the regular repayment can be particularly important because it affects how much money you have available from week to week or fortnight to fortnight.

Credit Cards and Store Cards

Credit cards are existing credit commitments and should be disclosed when requested, even if the current balance is relatively low.

Depending on the assessment process, relevant information may include:

• The outstanding balance.
• Required repayments.
• The credit limit.
• Repayment history.
• Any missed or late payments.

Credit report information may also be relevant to some lending decisions.

Buy Now, Pay Later Accounts

Buy now, pay later arrangements can affect your cash flow because you commit to making payments over time.

Several overlapping purchases can add up to a larger regular commitment than you might expect.

Applications for buy now, pay later arrangements, as well as some late or missed payments, may also affect your credit record in certain circumstances.

The practical point is simple: include buy now, pay later commitments when reviewing how much of your income is already allocated to repayments.

Mortgage Repayments

A mortgage is often one of the largest ongoing commitments in a household budget.

An assessment may consider your regular repayments as well as any overdue payments or hardship arrangements that affect your current financial position.

Overdrafts and Lines of Credit

An overdraft or other revolving credit facility may also be relevant.

When requested, provide accurate information about the balance, credit limit and repayments or other obligations attached to the facility.

Unpaid Bills, Arrears and Payment Plans

Not everything you owe will be a formal loan, but unpaid bills and payment arrangements can still affect how much income you have available.

These may include:

• Utility arrears.
• Telecommunications debts.
• Council rates.
• Fines.
• Tax debts.
• Payment arrangements with service providers.

When reviewing your finances, it is useful to include all money you are committed to paying rather than looking only at formal loans.

Student Loan Obligations

A HELP or other student loan can affect the amount of income you have available when compulsory repayments apply.

For affordability purposes, what matters is the effect your commitments have on your actual financial position and available income.

What Does a Lender Assess About Your Existing Debts?

The amount you owe is only one part of the picture.

An assessment may also consider what you need to pay regularly, whether you are keeping up with those payments and how much income remains after your essential costs.

Your Total Repayment Commitments

A lender may consider your existing repayments together with the proposed new repayment to understand their combined effect on your finances.

This is why the size of a debt alone does not tell the full story.

A smaller debt with high weekly repayments could place more immediate pressure on your budget than a larger balance with lower regular repayments.

The Income Left After Debts and Essential Expenses

Your total income does not show how much you can comfortably afford to repay.

You also have ongoing expenses such as:

• Rent or mortgage repayments.
• Food.
• Electricity, gas and other utilities.
• Transport.
• Insurance.
• Medical expenses.
• Costs associated with dependants.
• Existing loans and credit commitments.

The amount left after these commitments gives a clearer picture of whether another repayment could fit into your budget.

A new repayment may not be appropriate if it would leave you without enough money for essential expenses or make financial hardship reasonably foreseeable.

Your Repayment Conduct

Recent missed or late payments may indicate that your existing commitments are already difficult to manage.

A lender may need to understand factors such as:

• Why a payment was missed.
• Whether the issue was temporary or ongoing.
• Whether the account remains overdue.
• Whether you have entered into a hardship arrangement.
• Whether another repayment would realistically be affordable.

A missed payment does not necessarily determine an application by itself. Your overall circumstances still matter.

Recent Applications for Credit

Some lenders use credit reports as part of their assessment.

Credit reports can contain information about credit accounts, repayment history and requests made by credit providers to access your report.

Submitting several formal credit applications within a short period can therefore be relevant to future lending decisions.

Comparing products before applying is different from submitting multiple applications. It can be sensible to review eligibility requirements, fees and repayment obligations first.

Whether Your Information Can Be Verified

A responsible lending assessment does not necessarily rely only on the information entered into an application form.

Depending on the lender and credit product, information may be checked using:

• Bank statements.
• Payslips or other income information.
• Existing loan statements.
• Account transaction history.
• Credit report information.
• Details of current repayment arrangements.

The information required can vary between lenders and products.

How Can Bank Statements Show Existing Debts?

Bank statements can help show how money regularly moves into and out of your account.

Recurring transactions may show payments to:

• Banks and finance companies.
• Credit card providers.
• Buy now, pay later services.
• Debt collectors.
• Utility providers.
• Government agencies.
• Other repayment arrangements.

Statements may also help verify income, housing costs and everyday expenses.

When you apply with us, your eligible income needs to be visible through your bank statements. We also consider your existing financial commitments when assessing whether our proposed repayments would be affordable without causing further financial difficulty.

This is why it is important that the information you provide accurately reflects your financial circumstances.

A Fictional Example of How Existing Debts May Affect Affordability

Consider this fictional example.

Taylor has reliable employment income and needs to pay for an unexpected car repair.

Taylor is already making repayments on a car loan and credit card, as well as two buy now, pay later purchases.

Each commitment may look relatively manageable on its own. However, when the repayments are added together with rent, groceries, utilities and transport costs, Taylor has limited income remaining.

Adding another loan repayment could make the overall budget too tight.

Depending on the circumstances, a lender could therefore determine that the proposed loan is not affordable or decline the application.

This example does not predict the outcome of a real application. We assess applications based on individual circumstances and our applicable legal and credit requirements.

How to Prepare Before Applying When You Already Have Debts

Taking some time to understand your current financial position can help you decide whether another repayment is realistic.

1. List Everything You Owe

For each debt, consider recording:

• The current balance.
• The regular repayment.
• The interest rate.
• Relevant fees.
• The remaining term.
• Whether any payments are overdue.

Remember to include credit cards, personal loans, vehicle finance, buy now, pay later arrangements, overdrafts, unpaid bills and payment plans.

2. Review Your Recent Bank Statements

Look through your statements so that you understand your regular repayments, bills and subscriptions.

Your application information should be consistent with your actual financial position.

You should not hide, omit or misrepresent existing repayments. Accurate information allows a lender to make a more reliable assessment of your circumstances.

3. Prepare a Realistic Household Budget

Compare your reliable take-home income with your essential expenses and current repayments.

Remember that some costs do not arise every week.

These may include:

• Car registration.
• Insurance.
• Medical appointments.
• School expenses.
• Home maintenance.
• Seasonal electricity costs.

A budget that works only when no unexpected expenses arise may not leave much room for another repayment.

4. Check Your Credit Report When Relevant

You can request a free copy of your credit report and check that the accounts and debts recorded against your name are correct.

If you find genuinely incorrect information, you can ask the relevant credit reporting body or credit provider to investigate it.

You do not need to pay a credit repair company simply to have a genuine error corrected.

5. Avoid Submitting Several Applications at Once

You can compare lenders and products without formally applying for each one.

Before submitting an application, consider reviewing the lender’s eligibility requirements, fees, repayment obligations and other important conditions.

Multiple credit enquiries within a relatively short period can be visible on your credit report and may be relevant to some lending decisions.

6. Consider Reducing Existing Commitments First

Reducing your existing debts may increase the amount of income available in your budget.

However, you should not use money required for rent, food, medication, utilities or other essential expenses simply to improve your chances of obtaining another loan.

Depending on your circumstances, waiting, gradually reducing your commitments or speaking with an existing provider about repayment options may be more appropriate.

What if You Are Already Struggling With Debt?

Taking out another loan is generally not an appropriate way to deal with ongoing financial hardship or repeatedly cover ordinary household expenses.

When your existing repayments are already difficult to manage, adding another commitment can make the situation harder.

You may be able to contact your current lender, biller or service provider to discuss options such as:

• A more manageable repayment arrangement.
• Financial hardship assistance.
• A temporary variation to repayments.
• Additional time to pay.

Free and confidential financial counselling is also available through the National Debt Helpline on 1800 007 007.

A financial counsellor can help you understand your debts, prioritise important expenses and explore available options without selling you a financial product.

How We Assess Applications When You Have Existing Debts

We offer unsecured Medium Amount Credit Contracts, subject to eligibility, assessment and approval.

Having another debt does not automatically make you ineligible. However, we need to consider whether you could afford our proposed repayments alongside your existing commitments.

Our current eligibility requirements generally include that you:

• Are at least 18 years old.
• Receive at least $750 per week or $1,500 per fortnight in take-home income.
• Have your take-home income visible through bank statements.
• Are not unemployed or relying solely on government benefits.
• Can afford the repayments without being placed into further financial difficulty.
• Are seeking credit for an eligible personal purpose rather than a business purpose.

Income can include a combination of employment income and government benefits, subject to our eligibility requirements.

Meeting these criteria does not guarantee approval. We assess your income, expenses, existing commitments and overall repayment affordability before deciding whether we can offer you credit.

You can review our loan eligibility requirements before deciding whether an application is appropriate for your circumstances.

Our Current Loan Amounts, Terms and Costs

Our unsecured Medium Amount Credit Contracts currently include:

In certain circumstances, other fees may apply.

Loan amounts above $2,500 are limited to eligible returning customers who have successfully completed two Sunshine Loans on time.

Our comparison rate is 66.2% per annum, calculated on a $2,500 loan over two years.

The comparison amount and term are prescribed for comparison-rate purposes. We do not offer our Medium Amount Credit Contracts over two years.

Warning: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

Before applying, you should review our loan costs and repayment terms carefully and consider whether the repayments would fit comfortably within your budget.

Sunshine Loans Pty Ltd holds Australian Credit Licence number 390556.

What Are Some Alternatives to Another Loan?

Another loan is not always the most suitable option.

Depending on your circumstances, you may want to consider whether you could:

• Use available savings while retaining an appropriate emergency buffer.
• Ask a biller or service provider about an instalment plan.
• Request financial hardship support.
• Delay a non-essential purchase.
• Review your budget for temporary savings.
• Check whether you are eligible for a No Interest Loan.
• Speak with a free financial counsellor.
• Compare suitable credit options and their total costs.

Borrowing should only be considered when the expense is appropriate, the credit product suits your circumstances and you can afford the repayments without compromising essential expenses.

Frequently Asked Questions

Can I Apply for a Loan While Repaying Another Loan?

Yes, you can apply while repaying another loan, but your existing repayment will form part of your financial commitments.

We will need to consider whether you can manage your existing obligations and our proposed repayment alongside your normal living expenses.

Approval is never guaranteed.

Does Credit Card Debt Affect a Loan Application?

It can.

Credit card balances, required repayments, credit limits and repayment history may be relevant depending on the lender’s assessment process.

You should disclose a credit card accurately when requested, even if you do not use it regularly.

Do Buy Now, Pay Later Accounts Count as Debt?

Buy now, pay later arrangements create repayment commitments and can reduce the amount of money available in your budget.

Applications and some late or missed payments may also affect your credit record.

You should include these commitments when working out what you already owe and which repayments you need to make.

Will Paying Off an Existing Debt Guarantee Loan Approval?

No.

Reducing a debt may improve your available income, but approval still depends on your wider financial circumstances and the lender’s assessment criteria.

When you apply with us, we still need to assess your income, expenses, financial commitments and overall affordability.

Should I Apply to Several Lenders to Improve My Chances?

Submitting several formal applications within a short period is generally not a good way to approach borrowing.

Some credit enquiries can appear on your credit report.

It may be more useful to compare eligibility requirements, costs and repayment obligations before choosing whether and where to apply.

What Should I Do if My Current Debts Are Unaffordable?

Contact your lenders or service providers as early as possible and ask about hardship assistance or alternative repayment arrangements.

You can also contact the National Debt Helpline on 1800 007 007 for free and confidential financial counselling.

If your current commitments are already unaffordable, another loan could make your financial position more difficult.

Review Your Complete Financial Position Before Applying

Existing debt is only one part of a responsible lending assessment, but it can make a meaningful difference to your repayment capacity.

Before taking on another financial commitment, list your existing debts, review your regular expenses and consider whether another repayment could fit into your budget without affecting essential costs.

You can then review our eligibility requirements and loan costs and repayment terms to understand our product and decide whether it may be appropriate for your circumstances.

Applications are subject to eligibility, responsible lending assessment and approval. Borrow only what you need and can afford to repay.

The information provided in this blog is for general informational purposes only and does not constitute financial advice. It is not tailored to the specific circumstances of any individual. Before acting on the information, you should consider whether it is appropriate for you, having regard to your objectives, financial situation and needs.