Making a decision to purchase a major item like Solar, a new car, a new kitchen or bathroom is emotional. Your customer wants to make the decision and start enjoying the benefits straight away so the question on their mind, after making a buying decision, is “How fast can we get it installed?”
Zero deposit finance is a powerful way to remove money and price as an obstacle and help people make a decision today. It also gives you an option to up-sell with little difference in financial commitment. Even with finance your customer still asks the same question “How fast can we get it installed?” so having finance approved immediately and installation scheduled straight away removes the stress of waiting for a long time for an answer.
In a sales situation it is helpful to understand how an application is assessed so you will know, in advance, if approval is likely and if not how to help your client present themselves in a way they are more likely to get across the line.
With residential loans determining serviceability simple. Assuming your client owns their home and their credit history is clear the main other hurdle is serviceability. This is calculated as follows;
Total income after tax
LESS housing expenses
LESS 3% of credit card limit
LESS Household expenses (gas, electricity, house insurance)
LESS Henderson poverty index
If the end value is greater than zero a loan is likely to be approved.
What is the Henderson Poverty Index?
The Henderson Poverty Index is the living expense amounts lenders use in their finance calculators to see how much you can borrow. It is updated by the University of Melbourne each quarter.
When you apply for finance the paperwork asks you to state your living expenses and how much you spend. With those figures, they will compare it to the appropriate category in the tables below.
|Household – single||Index (monthly)||Household – couple||Index|
|No dependents||$1,250||No dependents||$1,817|
|1 dependent||$1,717||1 dependent||$2,284|
|2 dependents||$2,159||2 dependents||$2,726|
|3 dependents||$2,601||3 dependents||$3,168|
note: all calculations are based on the Henderson index December 2013
If you talk with your clients about their situation and can see they can meet the criteria this helps to overcome their fear of finance. This also means they can typically afford to spend more and make sure their solar array covers their bill; their bathroom has the better fittings and they can afford granite in the kitchen.
Of course, if the calculation does not seem to meet the criteria make sure you include parenting income from Centrelink, casual and other verifiable income to help them meet the serviceability requirements.