What Expenses Do Lenders Consider When Assessing a Loan?

When you apply for a loan, your income is only one part of the picture. A lender will also want to understand where your money goes and whether another repayment is likely to fit within your budget.

The expenses lenders consider may include housing, groceries, utilities, transport, insurance, healthcare, dependants, existing debts and discretionary spending. Less frequent costs, such as annual vehicle registration or insurance, may also be relevant.

In this guide, we explain the main expenses lenders may consider, how your financial information may be checked and how you can prepare a more accurate loan application.

What Expenses Are Considered by Lenders?

Lenders generally consider expenses that affect how much money you have left after meeting your existing financial obligations.

The categories and assessment process can vary between lenders and credit products, but common expenses include:

• Housing and accommodation.
• Household bills and utilities.
• Food and groceries.
• Transport.
• Insurance and healthcare.
• Children and other dependants.
• Existing loans and credit commitments.
• Personal and discretionary spending.
• Annual, seasonal and irregular costs.

Moneysmart recommends including essential expenses, debt repayments and less frequent costs when preparing a household budget.

Doing this can give you a clearer idea of what you actually have available after meeting your regular commitments.

Why Do Lenders Assess Your Expenses?

Lenders assess expenses to help determine whether you are likely to be able to manage the proposed repayments without experiencing substantial hardship.

Australia’s responsible lending framework generally requires relevant credit providers to:

• Make reasonable inquiries about your financial situation.
• Make reasonable inquiries about your requirements and objectives.
• Take reasonable steps to verify relevant financial information.
• Assess whether the proposed credit contract would be unsuitable.
• Not enter into a credit contract that is unsuitable.

This means an affordability and suitability assessment usually involves more than looking at your income alone.

A lender may consider:

• Your reliable income.
• Your essential living expenses.
• Your existing financial commitments.
• The proposed repayments.
• Your requirements and reason for seeking credit.
• The amount you would have left for ordinary living costs.

Having relatively high expenses does not automatically mean your application will be declined. Your circumstances need to be considered as a whole.

Each lender also has its own eligibility and lending criteria, so meeting one lender’s requirements does not guarantee that another lender will approve your application.

The Main Expenses Lenders May Consider

Housing and Accommodation

Housing is often one of the largest expenses in a household budget.

A lender may ask you about costs such as:

• Rent.
• Mortgage repayments.
• Board or other accommodation payments.
• Council rates.
• Body corporate fees.
• Home or contents insurance.
• Regular property maintenance.

If you live rent-free, that does not necessarily mean you should enter zero without providing any explanation.

A lender may want to understand:

• Your living arrangements.
• Whether the arrangement is expected to continue.
• Whether you contribute to the household in another way.
• Whether your circumstances are likely to change during the proposed loan term.

Utilities and Household Bills

Your regular household bills can have a significant effect on the amount of money you have available.

These expenses may include:

• Electricity.
• Gas.
• Water.
• Internet.
• Mobile phone plans.
• Home phone services.
• Streaming services and subscriptions.
• Household maintenance.
• Cleaning products and household supplies.

Some bills arrive monthly, quarterly or annually rather than every week.

You may need to convert them into a weekly, fortnightly or monthly average when completing your application.

For example, if you pay an electricity bill every quarter, averaging the total across three months may give you a more realistic picture of your ongoing electricity costs.

Groceries and Everyday Essentials

Food and basic household products are ordinary living expenses, so lenders generally need to account for them.

These costs may include:

• Food and groceries.
• Toiletries.
• Cleaning products.
• Clothing.
• Personal care.
• Pet food.
• Routine pet expenses.

Try to use a realistic figure based on what you normally spend.

An unusually low estimate may raise questions if the transactions in your bank statements show that your regular spending is considerably higher.

Transport and Vehicle Costs

Transport expenses often involve much more than petrol.

Depending on your circumstances, relevant costs may include:

• Fuel.
• Public transport.
• Vehicle registration.
• Car insurance.
• Servicing and maintenance.
• Tyres and repairs.
• Parking.
• Road tolls.
• Rideshare or taxi costs.
• Vehicle lease or finance repayments.

Annual expenses such as registration or insurance can generally be averaged across the year rather than ignored because they do not occur every month.

Children, Education and Other Dependants

If other people depend financially on you, their costs may affect how much income you have available for repayments.

Relevant expenses may include:

• Childcare.
• School fees.
• Uniforms and supplies.
• Child support.
• Medical expenses for dependants.
• Sport and extracurricular activities.
• Financial support for adult children.
• Care for an elderly or dependent family member.

You may also be asked how many people depend on your income, even when their expenses do not appear as individual direct debits in your account.

Healthcare and Insurance

Healthcare expenses may be regular, occasional or variable.

They may include:

• Health insurance.
• Medicines and prescriptions.
• Medical appointments.
• Dental treatment.
• Therapy and allied health services.
• Life insurance.
• Income protection insurance.
• Other regular insurance premiums.

If you have an ongoing medical expense, it should generally be reflected in your budget even when the amount changes from month to month.

Existing Loans and Credit Commitments

Your current debts are an important part of an affordability assessment because you may need to continue making those repayments alongside the proposed new loan.

Existing commitments may include:

• Home loan repayments.
• Personal loans.
• Car loans.
• Credit cards.
• Buy now, pay later arrangements.
• Consumer leases.
• Store finance.
• Tax or government payment arrangements.
• Other debts or formal payment plans.

Do not leave out a debt simply because it is nearly repaid or because you intend to close the account.

Provide accurate information and explain the circumstances when necessary.

Are HELP Debts Considered in a Loan Application?

A Higher Education Loan Program, or HELP, debt works differently from an ordinary personal loan because compulsory repayments are linked to your income.

ASIC updated its responsible lending guidance in March 2025 to clarify how HELP and other student loan commitments may be considered when lenders assess a credit application.

How a HELP debt affects an individual application may therefore depend on factors including:

• Your income.
• Whether compulsory repayments apply.
• The effect of those repayments on your take-home pay.
• The lender’s assessment approach.
• The type and amount of credit requested.

You should provide accurate information about your student loan commitments whenever an application asks for it.

Do Lenders Consider Discretionary Spending?

Lenders may also consider regular spending that is not strictly essential.

This can include:

• Restaurants and takeaway food.
• Entertainment.
• Holidays.
• Gym memberships.
• Gaming.
• Hobbies.
• Beauty treatments.
• Alcohol and tobacco.
• Memberships and subscriptions.

Some discretionary expenses may be easier to reduce than essential costs such as rent or groceries.

However, you should not assume that a lender will simply disregard your normal lifestyle spending or accept that all discretionary spending will stop once you receive a loan.

Be realistic about any changes you intend to make.

What About Annual and Irregular Expenses?

A useful budget should include expenses that do not occur every pay cycle.

Examples include:

• Car registration.
• Vehicle servicing.
• Annual insurance premiums.
• School expenses.
• Dental appointments.
• Pet treatments.
• Professional memberships.
• Gifts and family events.
• Seasonal energy bills.
• Regular home or vehicle repairs.

A single large transaction does not necessarily represent your normal spending.

However, if you know an expense occurs each year, including an averaged amount can make your budget more accurate.

For example:

$1,200 annual expense ÷ 12 months = $100 per month

You could also divide an annual expense by 52 to estimate its weekly cost.

How Do Lenders Check Your Expenses?

A lender may compare the figures in your application with financial information you provide or authorise it to access.

Depending on the lender and credit product, this information may include:

• Transaction account statements.
• Credit card statements.
• Existing loan statements.
• Payslips or other income information.
• Your credit report.
• Regular direct debits and transfers.
• Information about your household and dependants.

Bank statements can provide a useful picture of both regular expenses and broader spending patterns.

They can also reveal financial commitments that you may have accidentally left out of your application.

Lenders may also use statistical living-expense benchmarks as a reasonableness check.

However, responsible lending assessments require appropriate inquiries into your actual financial circumstances rather than relying solely on a general benchmark.

How Do Shared Household Expenses Work?

If you share expenses with your partner, a housemate or a family member, the lender may need to understand how much you personally pay.

For example, if your household rent is $600 per week but you genuinely pay half, your personal rent expense may be $300.

On the other hand, entering zero for an expense simply because the payment comes from your partner’s bank account may not accurately reflect your financial arrangement if you contribute towards the cost in another way.

Provide your actual share and explain arrangements that may not be obvious from your transaction history.

Joint debts and bills may also be relevant when you share legal responsibility for the account or contract.

How Do Expenses Affect Your Borrowing Capacity?

Borrowing capacity generally refers to the amount a lender believes you may be able to repay based on its assessment criteria.

A simple way to think about affordability is:

Income − living expenses − existing financial commitments = money potentially available for savings and additional repayments

A lender’s actual assessment is more detailed than this calculation.

It may also account for factors such as:

• Variable income.
• Changing bills.
• Repayment frequency.
• Irregular expenses.
• Dependants.
• The loan term.
• Whether your budget has enough room to deal with unexpected costs.

Higher expenses may reduce the amount you can comfortably repay.

Depending on the circumstances, a lender may offer a lower amount or decline an application when the proposed repayments do not appear affordable.

How to Prepare Your Expenses for a Loan Application

Review Your Recent Spending

Look through recent bank and credit card statements to identify your normal payments and spending patterns.

Reviewing several pay cycles is usually more useful than trying to remember what you spent during a single week.

Moneysmart also recommends checking bank statements when preparing a budget so that you can account for regular and occasional expenses.

Include Less Frequent Bills

Write down quarterly and annual costs, then convert them to the frequency requested in your application.

For example, if your annual car registration costs $900:

$900 ÷ 12 months = $75 per month

Ignoring these expenses can make the amount available in your budget appear higher than it really is.

Separate Essential and Discretionary Expenses

Separating essential costs from optional spending can make it easier to understand where your money goes.

It can also help you identify costs you could genuinely and sustainably reduce.

Do not state that you intend to cancel or significantly reduce an expense unless that change is realistic.

List Your Existing Debts Accurately

Include the debts and financial commitments requested in the application, such as:

• Credit cards.
• Personal loans.
• Vehicle finance.
• Buy now, pay later arrangements.
• Consumer leases.
• Formal payment plans.

Incomplete or inaccurate information can make it harder for a lender to properly assess your application.

Explain Unusual Transactions Honestly

Not every transaction in your account represents an ongoing living expense.

A one-off purchase, transfer or unusually large bill may require an explanation.

Provide accurate details and supporting information when requested.

Test the Repayment Against Your Own Budget

Before applying, consider adding the proposed repayment to your existing expenses.

Ask yourself whether you would still have enough money for:

• Housing.
• Groceries.
• Transport.
• Medical costs.
• Utilities.
• Other essential expenses.
• An unexpected bill.

A loan should not leave you dependent on further borrowing to meet your normal living expenses.

How We Assess Affordability at Sunshine Loans

We offer unsecured Medium Amount Credit Contracts to eligible customers seeking finance for an appropriate personal purpose.

When you apply with us, we assess your application individually and consider whether the proposed credit contract would be unsuitable.

Our current minimum eligibility requirements generally include:

• Being at least 18 years old.
• Having reliable take-home income of at least $750 per week or $1,500 per fortnight.
• Having income that is visible and verifiable through your bank statements.
• Receiving income from legal and verifiable sources.
• Having income from a source other than government benefits alone.
• Being able to make the proposed repayments without experiencing financial hardship.
• Using the loan for an eligible personal, non-business purpose.

Government benefits may form part of your income, but they cannot be your only source of income.

Meeting our minimum eligibility requirements does not guarantee approval.

Our current loan information includes:

Every application remains subject to our eligibility requirements, individual assessment and approval.

Before deciding whether borrowing may be appropriate for you, review our Loan Eligibility information and current Loan Costs and repayment terms.

Consider Your Alternatives Before Borrowing

Taking out a loan creates another financial commitment, so we encourage you to consider whether there may be another way to deal with the expense first.

Depending on your circumstances, options could include:

• Using available savings.
• Asking the service provider about a payment plan.
• Checking whether the expense can safely be delayed.
• Reviewing your household budget.
• Asking a provider about hardship assistance.
• Comparing suitable credit options and their total costs.
• Checking whether you qualify for a No Interest Loan.
• Speaking with a free financial counsellor.

Moneysmart also advises that a budget can help you understand where your money is going and reduce reliance on credit for ordinary everyday expenses.

Borrowing is generally not an appropriate way to repeatedly cover regular household expenses when your normal income is not enough to meet those costs.

If you are struggling with debts or essential expenses, you can contact the National Debt Helpline on 1800 007 007 for free, confidential and independent financial counselling.

Frequently Asked Questions

Are Groceries Included in a Loan Assessment?

Generally, yes.

Groceries and basic household products are ordinary living costs and are commonly considered when a lender assesses your expenses.

Use a realistic average based on what you normally spend rather than trying to provide the lowest possible figure.

Do Lenders Consider Subscriptions?

Regular subscriptions may be included in your expenses, particularly when they appear as recurring transactions.

Examples may include:

• Streaming services.
• Software subscriptions.
• Gym memberships.
• Gaming subscriptions.
• Other paid memberships.

Does a Lender Check Every Bank Transaction?

A lender may review transaction information that you provide or authorise it to access as part of an affordability and suitability assessment.

The exact review process and documents required can vary depending on the lender and credit product.

When you apply with us, the information available through your bank statements helps us assess your income, expenses, existing commitments and broader financial circumstances.

Can Reducing My Expenses Improve My Chances of Approval?

A genuine and sustainable reduction in your expenses may improve your overall financial position, but it does not guarantee that a loan application will be approved.

We assess each application individually.

You should never:

• Hide expenses.
• Move transactions between accounts to make your spending appear lower.
• Leave out debts.
• Provide misleading financial information.

What Happens if My Expenses Change Every Month?

Variable expenses are common.

You can use a reasonable average based on your actual spending and account for predictable annual or seasonal costs.

When a recent period was unusually expensive or unusually inexpensive, you may need to explain the circumstances.

Will a Lender Count My Partner’s Expenses?

A lender will generally need to understand your own financial commitments and your share of household costs.

Joint debts, shared bills, dependants and the way you divide household expenses may also be relevant.

Understand Your Budget Before You Apply

Knowing which expenses lenders may consider can help you prepare a more accurate application.

More importantly, it can help you decide whether taking on another repayment may be appropriate for your circumstances.

Before borrowing:

• Review your income.
• Record your essential expenses.
• Include existing debts.
• Account for less frequent bills.
• Consider the effect of an unexpected expense.
• Review the alternatives available to you.
• Check how another repayment would affect your budget.

You can review our eligibility requirements, Loan Costs and repayment terms, and frequently asked questions to learn more about how our loans work.

If you believe one of our loans may be appropriate for your circumstances, review our eligibility requirements before applying and only consider borrowing an amount you reasonably need and believe you can afford to repay.

The information provided in this blog is for general informational purposes only and does not constitute financial or legal 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.