So you want car finance but you aren’t quite sure you’ll get approved.
There may be many reasons that you fear rejection from a lender or broker. This might be bad credit in the past, the fact you’re applying for credit for the first time, you’re self-employed or you’re a non-Australian resident. Don’t fret - here are our Top 5 tips to get car finance in 2015.
1. Clear your debts and show you can save
If you’re approaching a broker or lender for a car loan, even if you intending to borrow up to 100% of the car’s value, showing you are paying off existing debts or saving goes a long way to gaining approval. This demonstrates that your financial situation is stable. It shows lenders you have disposable income to spend on car finance, plus all the other extras cars need; fuel, insurance and maintenance.
2. Look for a car that doesn’t blow the budget
A lender might reject you off the bat if you’re asking too much. Remember, buying a car isn’t just a matter of handing over an amount equal to the ticket price. You have to consider stamp duty, insurance, registration and all the other little costs that add up. If you don’t budget well, lenders might think you’re an irresponsible borrower.
3. Be prepared to use a security or guarantor
Sometimes to gain approval you might have to opt for a secured loan. Secured loans place your car as collateral or security. The risk to you is that the lender will repossess your car if you default on the loan. If you’re a first-time borrower or a new arrival, you might have to find someone to guarantee the loan on your behalf. This gives lenders peace of mind when they agree to lend to you.
4. Compare but don’t apply
The internet is great for researching all the different loan products and options out there. Get as much information as you can, but don’t apply. An application means a lender or broker goes so far to do a credit check. These show up on your credit history and can often cause trouble if you’re rejected more than once or twice. When making enquiries to lenders, say you don’t want them to check your credit history until you’re certain.
5. Do your credit history homework
Your credit history is often the biggest factor in determining whether you get your car loan approved. Sometimes, credit histories often contain mistakes. According to ASIC’s MoneySmart, creditors may incorrectly report defaults, fail to notify you of outstanding debts or plain forget to update their records. This leaves a black mark on your credit history that hampers your ability to gain approval. You can obtain your credit history through a credit-reporting agency. It’s your responsibility to fix any mistakes. Find out more at the MoneySmart website.
Article credit: Savvy