The Household Income Advantage

If you are married or living with a partner, you have options for how you present your finances to a lender.

Each lender has a different policy for how they assess “partner income” and whether they include it in your loan affordability assessment.

Most people assume their only option is a Joint Application, but that creates a new set of challenges (especially if your partner’s credit score is lower).

In this week’s customer story, we look at how one customer leveraged her household income to achieve a prime result, without putting her partner’s name on the loan.

Scenario

Our customer was looking for a 7-seater Mitsubishi Pajero to move the family around.

She had a solid Credit Score (632) and needed a loan around $40,000 to secure the vehicle.

She is currently working part-time and while her credit history was good, her individual income wasn’t high enough to pass the lender’s standard serviceability check.

She lives with her long term partner which gave us more options to structure an application to their advantage.

Some options that we considered included:

1. Individual Application

The loan repayments would be too expensive given her part-time income, and the application would be rejected.

2. Joint Application

We considered adding her partner to the loan to boost the income.

However, when you submit a joint application, the lender often prices the risk based on the lower credit score of the two.

In this case, the partner’s credit score was lower and would have excluded them from the cheaper loan options.

An approval could have been secured, but it would have been at a much higher cost.

3. Individual Application with Partner Income

We found a prime lender that allows a solo applicant to include their partner’s income to offset household living expenses.

Even without adding the partner to the loan.

This allowed her to be assessed on her Good Credit Score while using the Household Income to prove she could afford the repayments.