Lenders each have their own criteria around who can take out a personal loan and how much you can borrow. However, a few basic ground rules typically apply across most lenders.

Here are five main factors banks will look at when approving your personal loan application.

1. Your income

You don’t have to be wealthy to take out a personal loan, however a lender will want to see that you earn sufficient income to comfortably manage the repayments.

So, before you apply for a personal loan, it’s a good idea to have all your ducks lined up with evidence of regular income, such as copies of regular pay slips from your employer.

2. Your age

You’ll need to be aged at least 18 to take out a personal loan. You can show your age to a lender through the personal ID you’ll be asked to provide when you make a loan application – this can usually be your Driver’s License or Passport.

3. Your citizenship status

With most banks you will need to be a permanent resident or Australian citizen to take out a personal loan.

4. Your credit score

Your credit score is a number, usually between zero and 1,000 or 1,200, that lets banks see at a glance the sort of credit risk you represent as a borrower. The higher your score, the less risk you pose. This helps lenders who offer risk-based pricing give you a competitive rate customised to your situation.

Your credit score is based on your personal credit record. This is a summary of how well you’ve handled credit and debt in the past, managed by credit reference companies.

Some of the factors that can influence your credit score include the number of other credit applications you’ve made, and whether you have previously missed any credit repayments or have unpaid phone or power bills.

It can be a good idea to check your credit record before you apply for a loan. This lets you see in advance if any errors are on your file that could lower your credit score, and have the issue sorted before you talk to a lender.

You can head to the websites of credit reference agencies such as Equifax, to request a copy of your credit report – the first copy is usually free.

5. You haven’t been bankrupt

Bankruptcy is a legal process where you declare you can’t pay your debts. So, understandably, a bank may be reluctant to offer a personal loan if you have been declared bankrupt in the past. This is especially the case because banks have a legal requirement to lend responsibly, and that includes making inquiries about your financial situation.

How you can prepare

Getting ready to apply for a personal loan can be easy. As we noted, you may want to check your credit record first to check everything is in order. Then, it’s a matter of gathering some ID, proof of your income, and you’re got the main items you need to start your application!