What is borrowing power?
Borrowing power (also called borrowing capacity) is how much a lender is willing to lend you. It's calculated based on your financial situation to make sure you're only taking on as much debt as you can realistically manage.
How is it calculated?
The formula is straightforward: total income − total expenses = borrowing capacity
The more money coming in and the less going out, the higher your borrowing power. Your deposit size also plays a role.
Lenders factor in day-to-day living costs, existing loan repayments, credit card limits (yes, even if you pay them off), HECS/HELP debt, and any other financial commitments.
What drags your borrowing power down?
Credit cards — Lenders assess your total credit limit, not just what you've spent. A $10,000 limit reduces your borrowing power even if the balance is zero.
HECS debt — Counts as an ongoing liability in every lender's assessment.
Buy now, pay later — Many lenders now treat BNPL accounts like credit cards.
Lifestyle expenses — Subscriptions, dining out, gym memberships — they all get factored in.
How do you increase it?
- •Pay off or close credit cards you don't use
- •Reduce your credit card limits
- •Pay down personal loans before applying
- •Avoid taking on new debts in the months before you apply
Don't guess — calculate
Borrowing power varies significantly between lenders. The same applicant can get very different numbers from different banks. That's one of the big advantages of working with a broker — we compare across lenders and find who'll give you the best outcome.
Book a free chat with Kick Finance to calculate your borrowing power.
