iscover
iscover 
Given that official interest rates are now down 0.5 percentage points since February, you potentially have hundreds of dollars in monthly savings. That suddenly free cash can substantially boost your borrowing power.
However, it is neither wise nor necessary to pin your ability to borrow funds solely on the interest rate of the day. Take charge of your finances to maximise your credit limit on an ongoing basis.
Shop around
Surprisingly, many people never shop around when seeking to borrow – they just accept whatever their current lender offers or stick with one of the big four banks. But banks aren’t loyal to you, so why remain loyal to them?
Just like buying a new washing machine or car, shopping around for a loan can get you the same (or better) for a lower price. And when it comes to loans, lower interest rates mean greater borrowing power.
Nowadays, there are a huge number of lenders, including non-major and regional banks, credit unions, building societies, mutuals, and online lenders to choose from. Their smaller size means they often offer better deals to attract new borrowers and generally have better customer service too.
Reduce your debts
Paying down debt is obvious: the less you owe, the more you can borrow. However, many people don’t realise this applies to theoretical debts as well as actual ones.
Take, for instance, your credit card. When applying for a loan, lenders assume that your card limit is maxed out and reduce your borrowing limit accordingly. A $10,000 credit limit wipes $10,000 off your borrowing capacity – even if you pay it off monthly and never use the full amount.
If you have two credit cards with the same limit, your borrowing capacity is now $20,000 less. And so on.
Help yourself here by cancelling multiple credit cards and other credit facilities (especially unused ones) and reducing the credit limits on the one(s) that you retain.
Refinance other loans
If you have multiple loans, refinancing them at the same time as applying for a new loan may help you borrow more, particularly if you consolidate multiple loans.
Fewer loans can be more attractive to lenders, meaning they may be more willing to lend more.
Refinancing allows you to tap into equity, particularly from your home or property investments, to increase your deposit size and reduce how much you need to borrow or bring down your loan-to-value ratio (LVR).
Many lenders offer cheaper rates and lower fees on “high value” borrowers who have larger loans with them and those with smaller LVRs.
Credit history
When was the last time you checked your credit history? You can do so for free every three months. Look for mistakes. If you find any, contact the relevant party to set the record straight.
You can maintain a good credit history by:
- Paying all debts and loans on time. Overdue or late payments don’t satisfy a lender that they will receive their money on time if they lend to you.
- Applying for credit sparingly. Even applications that are knocked back or that you don’t pursue are recorded – too many can look suspicious or risky and result in a lower borrowing limit.
- Being alert to scams and identity theft. You could be saddled with debts you’re not even aware of. Report anything suspicious immediately.
More details on how to access your credit score and full credit report are listed on the government’s Moneysmart website.
Word of warning
The caveat to all of this is to never borrow more than you can afford. Just because you can borrow up to a certain amount doesn’t mean that you should.
If the pandemic and subsequent inflation crisis of recent years have taught us anything, it is that things change, often unexpectedly. What may seem (just) affordable today could prove wildly unaffordable tomorrow if interest rates suddenly rise again or other factors hit your ability to make repayments (rental vacancies, redundancy, illness, etc).
Don’t put yourself in a situation where you may be forced to sell investments at a loss.
Helen Baker is a licensed Australian financial adviser and author of the new book, Money For Life: How to build financial security from firm foundations
