Car buyers in Australia commonly choose to finance their purchase, because taking out a loan allows you to buy a car sooner, with less money needed upfront. With interest rates being near record lows, car buyers can keep their repayments to a minimum too.
Car loan approvals aren’t guaranteed though, with lenders having the option to knock back an applicant who doesn’t meet the lending criteria. As a result, borrowers often have concerns about whether their car loan will be approved or rejected.
But if you understand how lenders review car finance applications, you can maximise your chances of getting an approval. In this article, you’ll learn four things you can do to give yourself the best chance of scoring an approval on your next car loan.
Stay in your job
Lenders have a strong preference for applicants who have stable employment. If you have been in your job for at least six months, this will be viewed favourably.
Likewise, if you’re thinking of leaving your job or switching to a different job, you may want to hold off until after your loan has been settled.
Even if you receive a pre-approval on your car loan, it’s still best not to go switching jobs until your car purchase is complete. Pre-approvals are conditional and if your circumstances change (like employment), the lender can withdraw this approval before the loan settles.
Keep your bank statements tidy
Lenders will often ask to see up to 90 days of bank statements when you apply for a car loan. To increase your chances of an approval, you will want to keep these statements tidy.
The lender will be looking for any signs that may indicate you’re reckless with your finances. This includes dishonours, missed payments and late payment fees. Excessive gambling expenses are also looked at unfavourably.
If your bank statements show that you have been responsible with your finances, it will improve your chances of receiving an approval, so be sure to keep your finances in order leading up to your car finance application.
Use a finance broker
All lenders will have the same basic requirements, such as being at least 18 years of age and an Australian resident. But lending policies will vary between lenders. This means one bank or lender may approve your finance application, while another may not.
Applying with a lender that has favourable policies for your individual circumstances could be the difference between an approval and getting knocked back. It could also make quite a difference to your interest rate and repayments.
But with over 50 lenders to choose from in Australia, it’s almost impossible to know which one will be most suited to your personal circumstances. That’s why it pays to go to a finance broker like Credit One.
They have access to a panel of 40+ lenders and they will be able to match you with a lender that provides the best chance of an approval for you.
Know your limits
Before you go ahead and apply for your car loan, it’s important to calculate what you can really afford. Once you know how much you want to borrow, you can use a car finance calculator to work out what your repayments would be for that amount.
Consider your existing expenses as well as other financial obligations you already have. If there isn’t enough money left over to make your repayments, you may need to look at a lower priced car or save for longer so you can make a larger deposit.
Financiers won’t lend money to you if you don’t have sufficient room to make your repayments. So it’s best to work out what you can realistically afford before submitting your application.
For a no-obligation discussion about your car loan or a free quote, contact Credit One.
This article is the first in a series of Guides; a soon to be launched suite of articles which will include such things as getting your licence, driver training courses, great driving roads, maintaining your motor vehicle, and plenty in-between.