Getting your car loan approved (2021)
An approved car loan brings people a sense of great success and accomplishment, whether you are in the market for the first time or nearing the end of an old loan. The experience is exciting but can also be quite a challenge, especially if you are applying for the first time.
The truth is that different lenders have different requirements, whether that is the amount of information you provide to your financial abilities. All lenders have the right to refuse a loan application, and you must do all you can to get your finances in good shape to your car loan approved.
#1 Know your budget
There is more than just the car loan to consider when you think about your budget. Sit down and work what car loan amount you can afford, and use car loan calculators to narrow down this figure. Another aspect to consider is the expenses involved with owning a car such as maintenance, petrol, stamp duty, registration, and car insurance.
My suggestion would be to give yourself a buffer for each month and discover the cost surrounding the car. Knowing this will not only help you understand the costs involved but reduce the chance of being rejected.
#2 Freshen up your credit
Although “credit score” is not a common phrase used in Australia, lenders still use credit scores to assess their lending capabilities. Your credit score is calculated by looking at your personal financial information and kept in a credit report. You can find out more by visiting https://moneysmart.gov.au/managing-debt/credit-scores-and-credit-reports Moneysmart.gov.
Lenders will look at this report and decide if they will give you a loan. Lenders can also see whether you have been declined a loan from other lenders. So, if you are serious about getting a car loan approved, be sure to clear any outstanding bills and start a saving pattern.
#3 Limit your applications
As discussed in the point above, lenders can see if you have applied for loans from another lender. While it may be tempting to apply for multiple loans, this may affect the way lenders view your credit report. And be sure to limit the number of applications you give, and if you can, pick one lender.
#4 Compare lenders
Just like you would shop around for the best car deals, shopping around for a car loan can save you hundreds. Many websites can compare finance options such as https://www.canstar.com.au/ and https://www.finder.com.au/ and is a great alternative to physically visiting banks.
Another alternative is to get in touch with a finance broker that specialises in car finance. With so many different lenders, a finance broker can access deals that otherwise the public couldn’t. They can also narrow down the best product to suit your needs. Don’t settle for a loan you are not happy with, do your research and shop around.
#5 Know your car loan requirements
Reviewing loan requirements is important, even if you can afford to buy a new car. If you do not meet your lender requirements, then you most likely be rejected.
This can include your employment status as some lenders require you to either have a large down payment or require you to have a full-time job. Do your research and review what they expect from you and keep in mind that other lenders may have different requirements.
Even once you are approved, you should be away from exit penalties or monthly fees. More often, there are exit fees if you pay off the loan early. Some loan terms also will not accept additional payments on your loan, so it’s worth looking into that aspect as well.
#6 Credit cards may be an option
If you are planning to borrow a small amount, for example, $5000 or less, a credit card may be better suited for your situation. Compared to a personal loan, a credit card has an interest free period.
However, just like loans, do your research and understand the payment periods. If you can’t pay off your credit card in the interest-free period, it can revert to hefty rates that can cost you money.
#7 Save for a deposit
Depending on the type of loan you apply for, a large deposit may give you a higher chance of having your car loan approved. A deposit or savings displays that you are financially responsible and help make the process faster. Also, a larger deposit may be able to lower your monthly repayments as your loan is reduced.
In conclusion, if you are looking to have your car loan approved, be sure to go through the suggestions above to increase your chances. Above all, be sure to research before you sign any forms, as it will help you understand the loan terms. I would suggest using a financial broker in finding your next car deal, and you may be able to save thousands and get a great low rate.