Buying your first car is a really exciting experience. But it can be quite a challenge too, especially if you’re a young applicant applying for credit for the first time, or someone who is self-employed, has a bad credit history, or is only in casual employment.
While applying for a car loan can be tricky, it’s still possible to get your first car loan approved with these six tips.
Car loan pre-approval refers to your lender agreeing to loan you a sum of money to buy a car, subject to credit approval, and an invoice from the dealership. Going to a dealership with pre-approval means once you’ve picked out the car for you, you can be driving it in the next 48 hours.
Pre-approval can also be a great budgeting tool as you know the maximum amount the lender will let you borrow.
There are many expenses involved in owning a car apart from the maintenance and petrol. You will need to pay for things like stamp duty, car insurance and registration, which all add up. If you don’t budget well, this will be a burden. And your lender might reject your application. You can use our car loan calculator so you know how much your repayments will likely be and if you can actually afford it.
Even if you can afford to buy a new car, if you don't have all the required documents for a car loan you’ll likely be rejected. You should review the requirements so you know if you qualify for the car loan. Keep in mind that different lenders have different requirements.
If you have a big car deposit, there’s a higher chance your car loan will be approved. It shows the lender that you’re financially responsible as a borrower. Also, a bigger deposit means lower monthly repayments because the size of your loan is reduced.
A bad credit history is a major red flag to many car loan providers in Australia. You should be able to improve your credit score by clearing any debts against your name, and paying off your loans on time. Your goal is to have as little debt as possible, so you can show your lender you can make the car loan repayments.
Certain car loans come with certain conditions attached. For example, if you’re applying for our Green Car Loan, the car you want to purchase will have to be a hybrid vehicle or be more fuel-efficient than average for a car of its size. If this isn’t the case, you are not likely to qualify for that particular loan. Another condition you might come across is a car not being older than a certain length of time.
This car loan tip is for people with no credit history. Opening a bank account is the first step into the world of credit, and lenders will examine your bank account balance and transaction history when deciding whether to give you a loan.
With the many car loan products out there, it pays to do your research so you know you’re getting the best possible deal that’s suitable to your needs and financial circumstances. You can compare loans by using a car loan calculator.
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