When I apply for a personal loan, will the lender contact my employer?

When applying for a personal loan, you need to make sure your ducks are all in a row. In other words, you’ll need to have gathered all your personal documentation and ensured you’re meeting the loan’s eligibility requirements.

Unless you’ve applied for a low-doc loan, personal loan eligibility requirements generally include meeting minimum income and employment requirements. Personal loan lenders generally look more favourably on borrowers who are employed full-time, with a long employment history. This means being employed for at least 3-6 months with one company, with 12+ months being ideal. 

Once you’ve lodged your personal loan application, the lender will make its assessment to determine if it will offer its approval. You may be wondering exactly what steps a lender may take, when assessing your application, including whether they’ll contact your employer for proof of employment. 

Let’s explore what a lender will assess in your personal loan application, and what you can do to help increase your chances of approval:

What a personal loan lender checks in an application

A personal loan lender assesses your application based on its internal eligibility criteria. 

While this may vary for each lender in Australia, some factors that most lenders will review include:

• Personal identification, including your driver’s license, passport, or photo ID
• Credit history and credit score
• Outstanding debts, including credit cards and other loans
• Bank and credit card statements
• Recent payslips

Do personal loan lenders call your employer?

Your most recent payslip is generally all that is required to provide proof of employment when applying for a personal loan. A bank or lender may also ask for your employer’s contact details, but not necessarily to use them – they may simply want another option available just in case they need to contact you about your loan in the future. An employer’s contact information can also help a lender prevent fraud, as the lender can verify that both you and the employer are indeed who you say you are.

While there is no hard and fast rule whether banks call employers to verify employment as part of a personal loan application, there is a chance this may occur. If you’re uncertain, consider going into your application assuming the lender will contact your employer. 

The most important thing a borrower can do is ensure the supporting documents in their application are truthful and accurate. Not only can a rejected personal loan application go on your credit report and hurt your credit score, but purposely falsifying documents for a financial product may be reported as fraud.

Can you apply for a personal loan without income proof?

If you work as a casual, or if you’re a freelancer, contractor, or small business owner, you may not be able to provide a bank with the proof of income they prefer with your personal loan application. Instead, you may be able to apply for a low-doc personal loan, which lets you use different paperwork to support your application. You’ll still need to provide proof of income, but you may be able to use bank records, tax returns, business statements, or an accountant’s letter instead of payslips from an employer.

How borrowers can boost their chances of approval

Some tips to consider when trying to boost your personal loan application’s chance of approval include:

Improve your credit score

Your credit score helps a lender determine your creditworthiness and your likelihood of defaulting on a loan. If you know your score could use some improvement, consider taking steps to boost your credit score before you apply. 

Reduce your expenses

When a lender assesses your existing expenses and debts, if it believes you won’t be able to service the repayments on another debt, it may reject your new personal loan application. If you’re already repaying multiple sources of debt, such as a credit card and a car loan, it may be worth considering paying off your debts and/or cancelling your credit cards if possible before you apply.

Waiting to apply

If you’ve just started a new role, consider holding off on your loan application until you’ve passed your probation period, so you can show you’ve been employed long enough to meet the lender’s eligibility criteria.

Do your research

If you’re employed on a casual or part-time basis, you may want to reach out to a lender first to check your eligibility. You can ask a lender what their income minimum is for applying for a personal loan. If you can prove that you earn enough income and that your role is secure, this may increase your chances of approval.

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