Why Two Borrowers With the Same Income Get Different Loan Approvals

(And How to Fix It)

One of the most confusing — and frustrating — things borrowers experience is this:

“My friend earns the same as me.
They were approved for a bigger loan.
Why was I declined?”

On the surface, it feels unfair.
Same income. Similar age. Similar property price.

Yet one buyer gets approved easily, while the other struggles — or is declined entirely.

The reason is simple (but rarely explained properly):

Home loan approvals are not based on income alone.

Let’s break down what actually happens behind the scenes — and what you can do to improve your outcome.

Income Is Just the Starting Point (Not the Decision)

Most borrowers focus heavily on income:

• Salary
• Household income
• “How much can I borrow?”

But banks don’t approve loans based on income.
They approve loans based on serviceability.

Serviceability is the bank’s way of asking:

“After all assumptions, buffers, and expenses — can this borrower comfortably repay the loan?”

This is where two borrowers with identical incomes can end up with very different results.

The Real Factors That Change Loan Outcomes

1️⃣ Living Expenses Matter More Than You Think

Banks don’t just look at what you say you spend.

They compare:

• Declared living expenses
• Bank transaction behaviour
• Household size
• Minimum benchmark models

If your spending patterns appear higher or inconsistent, your borrowing power can reduce significantly — even with strong income.

Key insight:
Two people earning the same amount but living differently will not be assessed the same.

2️⃣ Existing Debts Are Assessed Conservatively

Credit cards, car loans, HECS, personal loans — all reduce borrowing power.

But here’s the catch:

• Banks don’t assess debts at actual repayments
• They use higher assumed repayments

A credit card you barely use can still reduce your borrowing capacity far more than expected.

This is one of the most common reasons borrowers are surprised at the outcome.

3️⃣ Employment Type Changes Everything

Even with the same income, lenders assess employment differently.

For example:

• PAYG vs contractor
• Permanent vs casual
• Industry stability
• Length of employment

Some lenders shade income, require longer history, or apply stricter buffers depending on your role.

This is why lender selection is critical.

4️⃣ Shading of Income (Not All Income Is Equal)

Banks don’t treat all income the same.

Some examples:

• Overtime may be partially counted
• Bonuses may require a two-year history
• Allowances may be capped or excluded
• Rental income is usually shaded

So while two borrowers may “earn” the same amount, the usable income can differ significantly.

5️⃣ Household Structure Impacts Borrowing Power

Borrowing capacity is also affected by:

• Number of dependants
• Childcare costs
• Private schooling
• Family size

Even if income is identical, a larger household will generally have higher assumed expenses.

6️⃣ Lender Policies Are Not the Same

This is the biggest misconception.

Banks differ in:

• Assessment rates
• Expense assumptions
• Income acceptance
• Risk appetite

A deal declined by one lender may be easily approved by another — without changing the borrower’s circumstances.

This is why relying on one bank’s calculator can be misleading.

Why Online Calculators Often Get It Wrong

Online calculators are:

• Generic
• Simplified
• Based on best-case assumptions

They don’t account for:

• Real transaction behaviour
• Shaded income
• Credit limits
• Policy nuances

They are useful for rough guidance — but dangerous when treated as certainty.

How This Impacts Buyers in the Real World

This difference in assessment often leads to:

• Buyers missing out on properties
• Contracts falling through
• Stress during finance clauses
• Unexpected last-minute declines

Most of the time, the issue isn’t the borrower — it’s the strategy.

How to Improve Your Loan Outcome (Even If You’ve Been Declined)

Here’s what actually helps.

✅ 1. Understand Your True Borrowing Position

Not just a number — but why that number exists.

✅ 2. Choose the Right Lender (Not the First One)

Policy matters more than brand or headline rate.

✅ 3. Optimise Debts Before Applying

Small adjustments can unlock significant borrowing power.

✅ 4. Structure the Loan Correctly

How a loan is structured can impact future flexibility and approvals.

✅ 5. Get Advice Before You Commit

Most problems are easier to fix before contracts are signed.

The Lendloop Approach

At Lendloop, we don’t rely on assumptions or generic calculators.

We focus on:

• Understanding your real financial position
• Matching you with the right lender strategy
• Planning for today and future purchases

Because the goal isn’t just approval —
it’s a smooth settlement and long-term confidence.

Final Thought

If two borrowers with the same income can receive different outcomes, the system isn’t broken — it’s just complex.

Understanding how lenders think, and planning accordingly, gives you control instead of confusion.

And that’s where the right advice makes all the difference.

👉 If you’re unsure why your borrowing power looks different from what you expected, a strategic review can often uncover simple improvements.