Why Do Lenders Ask About Your Financial Requirements and Objectives?

Have you started a loan application and been asked why you need the money, how much you want to borrow or what repayment arrangement would suit you?

These questions can feel personal, especially when you have already provided information about your income. However, assessing a loan application involves more than looking at how much you earn.

Lenders may also need to understand your requirements and objectives, your broader financial situation and whether the proposed credit contract would be unsuitable for your circumstances.

When you apply for a loan with us, we ask relevant questions so that we can understand what you need the credit to achieve and assess your application in line with our responsible lending obligations.

What Are Loan Requirements and Objectives?

Your loan requirements and objectives describe what you need from the credit product and what you are trying to achieve by borrowing.

Depending on the loan and your circumstances, this can include:

• How much you need to borrow.
• What you intend to use the money for.
• When you need to pay the expense.
• How long you expect to take to repay the loan.
• Whether the proposed repayment arrangement works with your circumstances.
• Any product features that are important to you.
• Whether the credit is for a personal or business purpose.

Your “objectives” generally do not mean your broader ambitions or long-term life goals. The questions are usually focused on the practical purpose and requirements of the credit contract you are considering.

For example, you may have different requirements if you need to pay for a specific vehicle repair than if you are considering a larger loan for home renovations. The amount, purpose, repayment period and type of credit you need could all be different.

Why Do Lenders Ask About Your Financial Requirements and Objectives?

To Meet Responsible Lending Obligations

Australian credit licensees providing regulated consumer credit have responsible lending obligations.

These include:

• Making reasonable inquiries about your financial situation.
• Making reasonable inquiries about your requirements and objectives.
• Taking reasonable steps to verify your financial situation.
• Assessing whether a proposed credit contract would be unsuitable.

A credit provider must not enter into a regulated credit contract with you if the contract is unsuitable.

That is why questions about your income, expenses, debts, loan purpose and borrowing requirements are an important part of an application rather than simply an administrative step.

When you apply with us, we also have these responsible lending obligations. You can read more about them in our Credit Guide.

To Understand Whether the Credit Matches Your Purpose

Loans can differ in their amounts, terms, fees, interest rates, security requirements and repayment arrangements.

Knowing why you want to borrow helps a lender understand whether the proposed product meets your stated requirements and objectives.

For example, credit intended for a specific personal expense may not be designed for business costs or for repeatedly covering ordinary household expenses.

Our Medium Amount Credit Contract is for eligible customers seeking credit for certain personal, non-business purposes. Our target market includes people who need help with infrequent or sometimes unforeseeable expenses, major items of personal property or certain one-off discretionary expenses.

Our product is not intended for business purposes. It is also not intended for regularly paying ordinary ongoing household expenses such as utilities, except in specified circumstances such as accumulated arrears or unusually high amounts resulting from special circumstances.

To Assess Whether the Amount Makes Sense for the Expense

You may be asked how you arrived at the amount you want to borrow.

Understanding the actual cost can help establish whether the requested amount relates to the expense you have identified.

Borrowing more than you need can mean taking on a larger repayment obligation and paying more interest.

When practical, it can help to confirm the expense before applying. For example, you might obtain a written repair quote, invoice or estimate rather than relying only on a rough figure.

To Consider the Loan Term and Repayments

Your requirements do not end once you receive the money. The repayment arrangement is also relevant.

A shorter loan term can mean larger individual repayments. A longer term can reduce the amount of each repayment but may affect the overall amount of interest you pay.

Depending on the product, a lender may ask about matters such as:

• How frequently you are paid.
• When your regular expenses are due.
• Whether you expect your income to change.
• Whether you expect significant expenses during the loan term.
• How the proposed repayments would affect your budget.

Your own estimate of what you can afford is useful information, but it does not determine the application outcome by itself. The credit provider must make its own assessment.

To Assess Your Capacity to Repay

Your loan purpose helps explain what you want the credit to achieve. Your financial information helps a lender assess how the repayments may affect your circumstances.

Information considered may include your:

• Employment and income.
• Regular living expenses.
• Rent or mortgage payments.
• Existing loans and credit commitments.
• Dependants.
• Bank account transactions.
• Known or reasonably foreseeable changes to your financial circumstances.

This is one reason a loan application can involve more than entering your income into a form.

When you apply with us, we assess every application individually and consider whether you can afford the proposed repayments without experiencing financial hardship.

What Questions Might a Lender Ask?

The exact questions will depend on the credit provider, the product and your individual circumstances.

You should answer these questions as accurately and completely as you can.

Leaving out an existing debt or understating a regular expense may prevent the credit provider from properly assessing your circumstances.

What Documents or Information May Be Required?

Requirements vary between lenders and products.

You may be asked to provide, or authorise access to, information such as:

• Personal identification.
• Details of your income.
• Recent bank statements or transaction information.
• Employment details.
• Existing credit commitments.
• Information about major living expenses.
• A quote, invoice or explanation supporting your loan purpose.

For our applications, you should have personal identification, income information and bank account details available. Your take-home income also needs to be visible through your bank statements.

Providing this information does not mean your application will automatically be approved. We assess every application individually, and approval remains subject to our eligibility and assessment requirements.

You can review our Loan Eligibility information before deciding whether to apply.

How Should You Describe Your Loan Purpose?

Be specific and truthful. You usually do not need to provide an unnecessarily long explanation.

For example:

Less specific: “I need money for bills.”

More useful: “I need $2,200 for an unexpected vehicle repair so that I can continue travelling to work. I have a written quote from the mechanic.”

The more specific explanation identifies:

• The expense.
• Why the money is needed.
• How the requested amount was calculated.
• The fact that it relates to a particular personal expense.

You should not change your stated purpose because you think another answer will improve your chances of approval.

Accurate information helps us, or any other credit provider you apply with, make the assessment based on your actual circumstances.

What Is the Difference Between Your Objectives and Your Financial Situation?

Your requirements and objectives and your financial situation are related, but they describe different parts of your application.

Your requirements and objectives explain why you need the credit and what you need the proposed loan to achieve.

Your financial situation includes matters such as your income, expenses, debts and other financial commitments.

Both can be relevant to a responsible lending assessment.

A loan might meet your stated purpose but involve repayments that you cannot afford without hardship. Alternatively, you may appear able to meet a particular repayment but require a different amount, term or product for your stated purpose.

The assessment therefore needs to consider more than one part of your circumstances.

How to Prepare Before You Apply

Taking a little time to check your information can help you provide more accurate answers and make a more informed borrowing decision.

Confirm How Much You Actually Need

Use a quote, invoice, statement or account balance where possible to identify the cost you need to cover.

Try not to add extra money for unrelated purchases simply because more credit may be available.

Review Your Budget

List your regular income, essential living expenses, existing debt repayments and less frequent costs.

Our How to Manage Your Budget guide can help you organise your income and spending.

Remember to include costs that may not occur every week, such as car registration, insurance, medical expenses, school expenses or annual subscriptions.

Think About Upcoming Changes

Consider whether anything is likely to change during the proposed loan term.

For example, this could include changes to your working hours, employment, rent, household expenses or other repayment commitments.

Providing accurate information about foreseeable changes can help the lender understand your likely financial position over the repayment period.

Compare the Total Costs and Conditions

The amount deposited into your account is only one part of a loan.

Before entering into a credit contract, review matters such as:

• The interest rate.
• Establishment or other applicable fees.
• Potential default fees.
• Repayment amounts and dates.
• The loan term.
• The total amount you are expected to repay.

You can review our Loan Costs page for information about the interest, fees and repayment terms applying to our current product.

Consider Alternatives to Borrowing

A loan may not always be the most appropriate way to meet an expense.

Depending on your situation, you could consider whether you can:

• Use available savings.
• Ask the service provider about a payment arrangement.
• Safely delay the expense.
• Request hardship assistance.
• Compare another suitable form of credit.
• Adjust your household budget.

If you are having difficulty paying essential living expenses or existing debts, taking on additional credit may make your financial position harder to manage.

You can speak with your existing lender or service provider about hardship support. Free and confidential financial counselling is also available through the National Debt Helpline.

How We Assess Your Loan Requirements and Objectives

We offer unsecured Medium Amount Credit Contracts to eligible customers seeking credit for certain personal, non-business expenses.

Our current product information includes:

Other fees may apply in certain circumstances.

We assess every application individually. Meeting our basic eligibility requirements does not guarantee approval, and we need to be satisfied that the proposed credit contract is not unsuitable for you.

You should review our Loan Eligibility, Loan Costs and FAQs before deciding whether our product may be appropriate for your circumstances.

Sunshine Loans Pty Ltd holds Australian Credit Licence number 390556.

Frequently Asked Questions

Is It Normal for a Lender to Ask What a Loan Is For?

Yes. When regulated consumer credit is involved, understanding your requirements and objectives can form part of the responsible lending assessment.

The purpose you provide can help the credit provider understand what you need the loan to achieve and assess whether the proposed credit contract would be unsuitable.

Can a Lender Ask to See My Bank Statements?

A lender may ask for bank statements or other financial information, or obtain relevant financial information with your consent, as part of verifying your financial situation.

When you apply with us, your take-home income needs to be visible through your bank statements.

Will Having a Reasonable Loan Purpose Guarantee Approval?

No.

Your purpose is only one part of the assessment. We also consider relevant information about your income, expenses, debts, financial commitments, eligibility and ability to make the proposed repayments.

Meeting our minimum eligibility criteria does not guarantee that we will approve your application.

Does a Lender Decide How I Am Allowed to Spend My Money?

A lender is not generally assessing every personal spending decision you make.

However, a credit provider may need enough information to understand the proposed use of the credit and your requirements and objectives. Products may also exclude particular purposes.

For example, we do not provide our current Medium Amount Credit Contract for business purposes.

What Happens if My Circumstances Change After I Apply?

You should tell the credit provider as soon as possible if a change could affect information relevant to your application, particularly your income, expenses, requested amount or intended loan purpose.

If your circumstances change while we are assessing your application, we may need further information before we can complete our assessment.

If your financial circumstances change after entering into a loan and you are having difficulty making repayments, contact us as soon as possible to discuss available hardship support.

Can I Ask for a Copy of Our Suitability Assessment?

Yes, subject to the requirements and timeframes that apply under the responsible lending framework.

If you ask us for a copy before entering into the credit contract, we must provide the written assessment before entering into that contract.

If you request it after entering into the contract, different timeframes apply depending on when you make the request. Our Credit Guide explains these requirements in more detail.

Understand the Questions Before Choosing a Loan

Questions about your financial requirements and objectives help a credit provider understand why you are applying, what you need the credit to achieve and whether the proposed contract could be unsuitable for your circumstances.

Answering accurately can also give you an opportunity to pause and review the borrowing decision yourself.

Before proceeding, consider whether the amount is no more than you need, whether the loan meets your intended purpose, whether the repayments fit your budget and whether you understand the interest, fees, terms and potential consequences of missing repayments.

If you believe our loan may be appropriate for your circumstances, you can review our Loan Eligibility requirements, Loan Costs and FAQs before applying. Applications are always subject to eligibility, assessment and approval.

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.