What Are Reasonable Inquiries During a Loan Application?

When you apply for a loan, you may be asked about your income, expenses, existing debts and what you intend to use the money for.

These questions can feel detailed, particularly when a lender requests bank statements or follows up on information in your application. However, they are usually part of the responsible lending assessment.

In Australia, reasonable inquiries are questions a lender asks to understand:

• What you need the loan for.
• Whether the proposed loan meets your requirements and objectives.
• Your current financial situation.
• Whether you are likely to afford the repayments without substantial hardship.

A lender must also take reasonable steps to verify relevant financial information before deciding whether the proposed credit contract would be unsuitable for you.

What Are Reasonable Inquiries in Responsible Lending?

Reasonable inquiries are relevant questions and information requests that help a lender assess your loan needs and financial circumstances.

Under the National Consumer Credit Protection Act 2009, a credit provider must make reasonable inquiries about your requirements, objectives and financial situation. It must also take reasonable steps to verify your financial situation before completing its assessment.

This does not mean every lender has to ask every applicant an identical list of questions. The information required can depend on factors such as:

• The type and amount of credit.
• The proposed repayment period.
• Your income arrangements.
• Your existing debts and financial commitments.
• Information shown in supporting documents.
• Whether any information is incomplete or inconsistent.

The questions should have a genuine connection to assessing the proposed loan. They are not intended to be irrelevant questions about your personal life.

Why Do Lenders Make Reasonable Inquiries?

The purpose of reasonable inquiries is to help a lender decide whether the proposed credit contract would be unsuitable.

A contract must be assessed as unsuitable when it is likely that you:

• Would be unable to meet the financial obligations under the contract.
• Could only meet those obligations with substantial hardship.
• Would receive a product that does not meet your stated requirements or objectives.

Responsible lending is therefore about more than confirming that you receive an income. A lender needs enough reliable information to understand the effect repayments may have on your overall financial position.

An assessment that a loan is “not unsuitable” is not a promise that it is the best product for you. It means the lender’s assessment has not identified circumstances that would require the contract to be treated as unsuitable.

Common Reasonable Inquiries During a Loan Application

The exact questions will vary between lenders and applications. However, reasonable inquiries commonly cover the following areas.

1. Your Reason for Borrowing

A lender may ask:

• What do you need the money for?
• How much do you need?
• Is the expense for a personal or business purpose?
• Is the expense a one-off cost or an ongoing commitment?
• When do you need to pay it?
• Could a smaller amount meet your needs?

These questions help the lender understand your requirements and objectives.

For example, applying for a loan to cover a specific car repair is different from regularly being unable to afford groceries or rent. Ongoing difficulty paying essential household expenses may indicate financial hardship that another loan is unlikely to resolve.

You should give an accurate and specific explanation. Do not change or conceal the purpose of a loan to try to satisfy eligibility requirements.

2. Your Income

A lender may ask about:

• Your take-home income.
• How often you are paid.
• Your employer or source of income.
• Whether your income is permanent, casual, contract or self-employed income.
• Government benefits you receive.
• Other regular and verifiable income.
• Recent or expected changes to your income.

The amount you earn is only one part of an affordability assessment. A lender may also consider whether your income is regular, reliable and likely to continue during the repayment period.

3. Your Regular Living Expenses

You may be asked about expenses such as:

• Rent or mortgage repayments.
• Groceries.
• Electricity, gas, water and telecommunications.
• Transport and vehicle costs.
• Insurance.
• Medical expenses.
• Childcare and education costs.
• Regular subscriptions.
• Personal and household spending.

A lender may compare the expenses you declare with information shown in your bank transactions.

It is important to include realistic amounts. Leaving out ordinary expenses can create an inaccurate picture of how much money you have available for repayments.

Moneysmart recommends reviewing bank statements when preparing a budget so that regular, debt-related and irregular expenses are included.

4. Your Existing Debts and Financial Commitments

A lender may ask about:

• Personal loans.
• Credit card balances and limits.
• Buy now, pay later arrangements.
• Vehicle finance.
• Home loan repayments.
• Consumer leases.
• Tax or government debts.
• Child support.
• Other recurring repayment obligations.

Existing debt reduces the amount of income you have available for a new repayment.

A lender may also consider information in your credit report when a credit check forms part of its process. Credit reports can contain details about credit accounts, repayment history, defaults and recent credit applications.

5. Your Household Circumstances

Relevant questions may cover:

• Whether you live alone or share expenses.
• The number of people financially dependent on you.
• Whether household expenses are divided with another person.
• Any regular financial support you provide.
• Costs associated with children or other dependants.

These inquiries help a lender understand the expenses you are responsible for rather than relying only on a general household estimate.

Being asked about dependants does not automatically mean your application will be declined. It is one part of understanding your individual budget.

6. Changes That Could Affect Repayments

You may be asked whether you know of any upcoming changes to your finances, such as:

• Reduced working hours.
• A fixed-term contract ending.
• Parental leave.
• Retirement.
• A significant increase in rent.
• A new debt commitment.
• A planned change in employment.

A lender cannot predict every future event. However, information about a reasonably foreseeable change may be relevant when it could affect your ability to make repayments.

7. Your Preferred Loan Amount, Term and Repayment Arrangement

A lender may ask about the product features you need, including:

• The amount you want to borrow.
• Your preferred repayment frequency.
• The period over which you want to repay the loan.
• Whether you expect to repay it early.
• Whether scheduled repayments fit your pay cycle.

The lowest individual repayment is not necessarily the lowest-cost option. A longer term can reduce each scheduled repayment but may increase the total interest paid, depending on the product.

Before accepting a contract, review the total amount repayable, interest, fees and repayment schedule.

What Does Financial Situation Verification Involve?

Making inquiries and verifying information are related but separate steps.

An inquiry involves asking you for information. Verification involves taking reasonable steps to check the reliability of relevant financial information.

Depending on the application, verification may involve reviewing:

• Bank statements or transaction data.
• Payslips.
• Income deposits.
• Employment information.
• Existing loan statements.
• Information from a credit reporting body.
• Other documents showing income or financial commitments.

Bank statements can help a lender identify your regular income, recurring expenses, existing repayments and the amount generally left after your commitments.

A request for clarification does not necessarily mean a lender believes you have provided false information. It may simply mean that a transaction, income variation or financial commitment cannot be understood from the available records.

What Makes an Inquiry Reasonable?

A reasonable inquiry should help a lender understand either your loan requirements or your financial position.

In practice, an inquiry should generally be:

• Relevant: The information should relate to the proposed credit contract, your needs or your repayment capacity.
• Proportionate: The depth of inquiry may vary according to the application and the financial risks involved.
• Clear: You should be able to understand what information is required and why it is relevant.
• Based on your circumstances: A responsible assessment should consider your individual situation rather than relying entirely on a generic assumption.
• Supported by verification: Important financial information should not simply be accepted without appropriate verification.
• Followed up when necessary: A lender may seek clarification when information is missing, inconsistent or materially different from supporting records.

ASIC describes the responsible lending process as gathering reliable information about what you want and your financial position, followed by an assessment of whether the contract is not unsuitable.

How to Prepare for Reasonable Lending Inquiries

Providing complete and accurate information can help a lender assess your application properly.

Review Your Budget

List your income, essential costs, debt repayments and irregular expenses. Look at recent statements rather than estimating everything from memory.

Consider whether the proposed repayment would leave you enough money for ordinary living costs and unexpected expenses.

Gather Your Documents

Depending on the lender, useful information may include:

• Identification.
• Current bank account details.
• Income information.
• Recent bank statements.
• Details of existing credit commitments.
• Information about the expense you need to pay.

Check That Your Information Is Consistent

Make sure the income, expenses and debts you declare in your application match the information available in your documents.

When something has recently changed, explain it accurately rather than leaving the lender to guess.

Borrow Only What You Need

A higher loan amount creates a larger repayment obligation. Work out what you need for the specific expense and avoid adding discretionary spending simply because additional credit may be available.

Ask Questions Before Signing

Review:

• The interest rate.
• Establishment and other fees.
• Repayment amounts.
• Repayment frequency.
• Loan term.
• Total amount repayable.
• Consequences of a missed payment.
• Hardship and customer support options.

Do not sign a contract until you understand your obligations.

What Happens if a Lender Considers the Loan Unsuitable?

A lender may decline an application when its assessment indicates that you could not make the repayments, could only do so with substantial hardship or would receive a loan that did not meet your requirements and objectives.

A declined application does not necessarily mean you have managed your money poorly. It may mean the proposed amount, repayment schedule or product does not fit your current circumstances.

Avoid submitting several new credit applications immediately after a decline. Credit applications may be recorded on your credit report, and numerous applications within a short period can affect how future lenders view your credit history.

Instead, you could consider:

• Asking whether the lender can explain the decision.
• Reviewing your credit report for errors.
• Checking your budget.
• Reducing existing commitments where possible.
• Requesting a payment plan from the service provider.
• Investigating hardship assistance.
• Speaking with a free financial counsellor.

How We Make Reasonable Inquiries at Sunshine Loans

At Sunshine Loans, we are an Australian credit provider offering unsecured Medium Amount Credit Contracts.

As part of our responsible lending obligations, we make reasonable inquiries about your requirements, objectives and financial situation. We also take reasonable steps to verify relevant financial information and assess whether a proposed credit contract would be unsuitable for you.

We assess every application individually, and approval is not guaranteed.

To meet our general eligibility requirements, you will usually need to:

• Be at least 18 years old.
• Have reliable take-home income of at least $750 per week or $1,500 per fortnight.
• Have income visible and verifiable through bank statements.
• Receive income from sources other than government benefits alone.
• Use the loan for a personal rather than business purpose.
• Be able to afford repayments without financial hardship.

Meeting these basic requirements does not guarantee approval. You can review our current loan eligibility requirements before submitting an application.

Our current product features include:

Applications remain subject to eligibility, responsible lending assessment and approval.

Before deciding whether our product may be appropriate for you, review our current loan costs and fees and our Credit Guide.

We intend our loans as a potential option for eligible consumers facing an infrequent, one-off or unexpected personal expense. They are not intended to fund regular ongoing ordinary household expenses, business costs or repeated borrowing.

Consider Alternatives Before Borrowing

A loan involves interest, fees and a commitment to make repayments.

Before applying, consider whether you could:

• Use available savings.
• Delay the expense.
• Negotiate a payment arrangement.
• Ask the service provider about hardship support.
• Reduce the cost of the purchase.
• Seek assistance from family or another appropriate support service.
• Use a suitable no-interest or low-cost community lending program.
• Speak with a free financial counsellor.

If you are regularly unable to pay for food, rent, utilities or other essentials, another loan may make the situation harder to manage. Contact the relevant provider about hardship assistance or speak with a financial counsellor before taking on additional debt.

Frequently Asked Questions

Are Reasonable Inquiries the Same as a Credit Check?

No. Reasonable inquiries cover your requirements, objectives and financial situation. A credit check is one possible source of information about your credit history.

A lender may use bank statements, income documents and other information whether or not it conducts a credit check.

Why Does a Lender Need My Bank Statements?

Bank statements can help verify your income, expenses, existing commitments and account activity relevant to affordability.

They allow a lender to compare the information in your application with your actual financial transactions.

Can a Lender Ask Follow-Up Questions About Transactions?

A lender may ask for clarification when a transaction pattern is relevant to your income, expenses, debts or ability to make repayments.

Answer accurately and provide context when necessary. Do not attempt to alter, hide or misrepresent financial information.

Can I Refuse to Answer a Lender’s Questions?

You can decide not to provide requested information. However, the lender may be unable to complete its responsible lending assessment and may not be able to approve your application.

Does Answering Every Question Guarantee Loan Approval?

No. Providing complete information allows your application to be assessed, but it does not guarantee approval.

A lender must consider your application as a whole, including whether the proposed repayments are affordable and whether the product meets your requirements and objectives.

Can I Ask for a Copy of the Suitability Assessment?

You can ask a credit provider for a written copy of its assessment. The applicable timeframe can depend on whether you request it before or after entering the credit contract.

We explain the request process and applicable timeframes in our Credit Guide.

Understand the Questions Before You Apply

Reasonable inquiries are an important part of responsible lending. They help a lender understand why you need credit, verify your financial circumstances and assess whether the proposed repayments are likely to be manageable.

Before applying, review your budget, gather accurate information and consider alternatives to borrowing.

You can then review our current eligibility criteria, loan costs and repayment terms to decide whether submitting an application may be appropriate for your circumstances.

If you believe our loan may be appropriate for your circumstances, review our eligibility requirements and costs before applying.

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.