Looking to get Car Finance but not sure if you can get approved?
You are ready to buy a car…but before you do, you have to get the least fun part of the car purchase out of the way.
The Car finance process. Which loan is best? What is the right loan amount? How will loan repayments work? There are a lot of credit products out there and all with various terms and conditions. Our guide below will assist you in your car loan application and considerations
- Consistent savings history
- Do your research but don’t apply
- Understand your credit history and score
- Shop within your budget
- Know what loan products are available and speak with a professional
- Check the Car Loan Calculator
Applying for Car Finance
One of the biggest hesitations in applying for finance is the fear of being declined. Whether it’s due to bad credit in the past, self-employed with no financials, non-Australian residency, or even just a first time applying for finance, the thought of not getting approved can be daunting. To help here is some tips for a better chance of approval.
1) Consistent savings history
In 2019, lenders are looking more and more closely at banking conduct (saving and spending). Before speaking with a broker, ensure you have at least 3 – 6 months of bank statements that can display evidence of savings and more importantly the bank account not going into arrears. Also, the ability to pay debts without draining account funds is a big step towards getting approval. The lender wants to see that you are not relying on your next pay instalment to get by and have some disposable income to keep you out of hardship.
2) Do your research but don’t apply
Do your shopping and compare car loans but don’t apply until you are ready and confident that you have a good shot at approval with a loan and loan terms you are happy with. Too many credit enquiries can impact your credit file and in turn, the nature of those enquiries will raise questions with a lender. They may want to know the outcome of previous applications, why there are several applications and also what they were for.
If you have payday loans or payday loan enquiries this can negatively affect borrowing power. Lenders want stability and from 2019 will be questioning customers cash-flow and ability to pay the loan much more.
3) Understand your credit history and score
You are eligible for 1 free check per year and the internet has access to many sites that will give you your credit score. Your credit history is a snapshot to the lender of your overall strength as a borrower. It will indicate if you have had court judgements, previous bad credit car loans, bankruptcies, defaults, loan enquiries, loans and credit cards. It is your responsibility to follow up anything you may feel is on your file in error.
4) Shop within your budget
Often times, another reason for an application to be declined (especially in the asset space such as a car or a boat) is that the borrowed amount doesn’t fit the profile of the customer. For example, an applicant that is under 25 with no established credit history wanting to finance an $80,000 sports car with no deposit is unlikely to be considered whereas a $20,000 first car fits the profile much better. With vehicle finance, it is easy to be sold on repayments through the dealer but ultimately the lender also looks at the total amount being financed.
5) Know what loan products are available and speak with a professional
Understanding the different types of loans and speaking with a broker can save you money both upfront and down the line.
If purchasing a vehicle, a secured consumer loan may offer lower terms along with lower fees and charges than a personal loan through a bank or if purchasing a property, having a guarantor as security can impact the borrowing capacity and the type of loan you qualify for. Even when speaking with a broker, always seek independent legal and financial advice.
If you are unsure if you are eligible for a car loan or would like to receive a no obligation quick assessment, visit our car loan calculator