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, meaning you’ve gathered all your personal documentation and ensured you’re meeting the eligibility requirements.

Unless you’ve applied for a low-doc loan, these eligibility requirements generally include meeting minimum income and employment requirements. Personal loan lenders generally look more favourably on applications 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, there are steps the lender will take. However, you may be wondering to what extend a lender will be 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 increase your chances of approval. 

What a personal loan lender checks in an application

As mentioned above, a personal loan lender assesses your application based on its internal eligibility criteria. 

While this may vary for every loan lender in Australia, there are several factors that most lenders will review, including:

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

Your most recent payslip is generally all that is required to provide proof of employment. But while there is no hard and fast rule stating a personal loan lender will contact your employer for verification, there is a chance this may occur. Go into your application assuming this will happen, and you should be covered. 

The most important thing a borrower can do is ensure the supporting documents in their application are truthful. 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.

How borrowers can boost their chances of approval

Here are some tips to consider when trying to boost your chances of personal loan approval:

• Improve your credit score. Your credit score helps a lender to determine your creditworthiness and your likelihood of defaulting on a loan. It is one of the most significant factors affecting your chances of approval. If you know your credit score could use some improvement, consider working on boosting it before you apply. 
• Reduce your expenses. If you’re already repaying multiple sources of debt, such as a credit card and a car loan, it may be worth considering paying this off before you apply. The lender will assess your existing expenses and debts, and if it believes you cannot service another debt repayment, your application may be rejected.
• Waiting to apply. If you’re concerned about not being employed for a long enough time or that you won’t meet the eligibility criteria for this section, it may be worth waiting to apply until you do. If you’ve just started a new role, consider holding off on your loan application until you’ve past your probation period.
• Do your research. If you’re employed on a casual or part-time basis, you may want to reach out to a lender first and enquire as to what their income minimum is. If you can provide proof that you meet this and that your role is secure, this may increase your chances of approval.

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