What are the requirements for a car loan?

Applying for a car loan can be done with just a few clicks, with the application and approval process now almost entirely online. While quick and relatively hassle-free, there are still a few steps involved before you can take your new car home. 

However, before the application process can even commence, you must meet the minimum lending requirements to obtain a car loan.  

Loan eligibility requirements 

For lenders, common eligibility requirements to apply for a loan are as follows: 

• Be aged 18 or over 
• Have Australian citizenship (or permanent residency) 
• Provide proof of income 

As part of responsible lending, lenders are required by law to ensure any loan product they approve will not put the borrower at risk of financial instability or risk. 

At loans.com.au, we require documents that prove who you say you are and that you’ll be able to comfortably repay the loan. We are required to ask for these documents to comply with responsible lending criteria. 

Documents needed for a car loan application 

When applying for a car loan, you’ll need to provide appropriate documentation. Preparing these documents beforehand will help avoid delays. The documentation requirements include: 

Personal information and identification forms 

Personal information and identification documents that have: 

• Your full name. 
• Your age. 
• Your date of birth. 
• Citizenship information. 
• A list of dependants (children, elderly or sick relatives you care for, etc.)

Lenders require a driver’s license, which will be electronically verified or certified. In some cases, we may require additional forms of identification, such as your Passport and Medicare Card. 

Proof of income 

When lenders assess a loan application, they look at your ability to repay the loan. As such, lenders will ask for each of the following: 

• Two most recent pay slips. 
• Bank statements for the last three months showing your incoming and outgoing expenses. 

Generally, you will also be asked to provide a detailed list of your current living expenses, such as rent or mortgage repayments. 

Lenders typically define income as money earned from employment, rental or investment sources. However, not all income is derived from employment. Retirees, for example, may receive income from superannuation or investments, while others may receive government benefits or disability payments. Some lenders may not recognise Centrelink payments as income, while others will do so based on specific car finance eligibility criteria. 

Regular fixed payments from Centrelink, such as Veterans payments, the age pension, family tax benefits, rent assistance, and National Disability Insurance Scheme (NDIS) payments, can be considered as income. However, temporary or supplemental measures like Youth Allowance payments are typically not considered as income. 

Proof of assets and liabilities 

You will also be required to provide documentation detailing your assets and liabilities to provide a broader view of your overall financial strength. Depending on your employment and personal situation, we may also ask for some or all of the information below: 

• Information on any other loans you have, such as mortgage and personal loan documents. 
• A summary of your share portfolio, if you have one, or a portfolio of other investments such as bonds. 
• A summary of your superannuation. 

Information about your car and insurance 

We need to know the details of the car you wish to buy, so we know how much it will cost and how much you’ll need to repay. 

When purchasing a car, you will generally need to supply the following: 

• A dealer invoice or contract of sale (contains address, contact numbers and ABN). 
• The vehicle chassis number. 
• The year, make and model of the car. 
• Information on the vehicle’s registration. 
• Information on the car’s fuel efficiency 

You may need to provide proof of comprehensive car insurance before receiving approval for a car loan. This is so you can repay the loan in full in case the car is written off. 

Tips when applying for a car loan 

If you want to improve your chances of getting your car loan application approved, you may want to keep these tips in mind: 

Determine your borrowing power 

Your borrowing power is the maximum amount that can be approved for a car loan. To estimate borrowing power, take your total income from all income streams and subtract all your expenses. Use our online car loan borrowing power calculator to get an idea of how much you could borrow. 

Understand different car loan types 

It's important to learn about the financing options available to you. Novice car buyers may not know that there are plenty of car loans out there that cater to specific needs. There are loans specifically for those buying new cars, used cars, caravans, or even refinancing their current car loans. 

It may be a good idea to discuss your car finance needs with a lending specialist so they can guide you to the best car loan offer. 

How to get pre-approved for a car loan  

When financing a new car, it’s a good idea to get pre-approved first. With a car loan pre-approval, you’ll get a better idea of what the new car interest rates and repayments will look like. You’ll have an easier time budgeting and expediting your car search.  

Here are a few tips to get pre-approved for a car loan:  

• Get your finances in order. Pay off any outstanding debts, check your credit reports, and make sure you're in the best financial situation possible. Lenders consider your credit history to see if you’re able to pay off the loan. By having good credit, you’re more likely to get pre-approved and have lower interest rates.  
• Prepare your documents beforehand. The best and quickest way to get pre-approved for a car loan is by having all the requirements ready to go. Some pre-approval loan applications are stalled because borrowers are missing some key documents, which delays the whole thing. Come prepared and get pre-approved faster.  

Use onTrack to speed up your application

Sending all of these documents can be a pain, which is why loans.com.au created onTrack to make everything much easier. Using onTrack, you can upload, review, and approve documents, receive notifications and track the progress of your car loan application 24/7.

Apply for a car loan today! 

Buying a car can be easy when you have your financing in order. For the car loans with competitive rates and great features, get in touch with loans.com.au! Talk to one of our friendly lending specialists or apply for a loan online.  

Disclaimer: The information provided in this article is general in nature and does not constitute financial or legal advice. Please seek professional advice tailored to your personal circumstances before making any financial decisions.

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