What Happens If I Forget? Undisclosed Debts Explained!

In today’s age with credit so readily available, its common place to have multiple credit facilities. With bank offering new credit cards with 0% balance transfers, and points, car yards advertising rates and repayments over their cars, store fronts offering store cards with no repayments and no interest, and an array of other incentives, it’s no wonder it’s getting hard and hard to keep track of your expenses. Bank and lenders are coming across this problem more and more, whilst in most cases its an honest mistake that a rarely used credit facility was simply not at the front of your mind when making your application, but as time goes on banks are getting tighter and tighter.

‘I forgot’ – banks hear this all too often. Even if it is true, this really doesn’t help your case. Imagine you’re lending your money to friends or family – you know they are terrible at managing their budget and you know they have no idea what their real expenses are and live each week to the last dollar and they can’t even tell you how many credit cards they have – would you lend your money to them? It’s the same for a bank – if you simply forgot you had a car loan and two additional credit cards, will you forget about your new home loan once it settled? Or, will you forget to pay your other debts and fall into hardship?

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It’s important to remember that everything you pay regularly is an ongoing liability and needs to be disclosed in your application. Going beyond just the obvious car loans and credit cards, this includes contractual gym memberships and services such as Foxtel, as well as any type of interest free product or loan  –  YES,  these are a real debt. Just because there are no repayments and no interest for two years, doesn’t mean you don’t have to pay it back at some point and it does needed to be included in your application – be very careful with these as these are easy to forget when you’re not making any repayments for 2 or more years!

Every time you make an application for credit, it is more than likely recorded on your credit file ready for the next lender to see, so there is no hiding it. Additionally, banks may look at your bank statements and ask questions about anything they are unsure about. If you intend to close a debt down as part of your application, you still need to disclose this in your application – just make a comment on the application and you will find far less headaches and far less stress.

As a mortgage broker, often we can win over the assessor and overcome many of these issues as simply what it is – an honest mistake, but what happens when the undisclosed debt reduces your borrowing capacity below what you need to secure your loan approval?

So remember – if you do not declare all your current liabilities correctly, the lender may decline your application. It is important to ensure that you have correctly disclosed all debts – ‘I Forgot’ is generally not acceptable, so make sure you understand your financial position before you apply – or better yet, chat with us and we’ll make sure we ask the right questions to ensure a high chance of success!

Want to know your true borrowing power? Check out our True Borrowing Power Calculator