If you’ve got your eye on your dream car, you need a car for work, or you just need something to get you from A to B, a car loan can get you there faster. With a car loan, you can shop for a car using finance instead of waiting until you’ve saved enough to buy the vehicle outright.
A car loan allows you to borrow an amount of money and agree to pay it back over a certain time period (called a term), including interest. These payments can be made in regular payments (weekly, fortnightly or monthly) and a typical term is between 12 months and 10 years depending on the lender you choose and the amount you borrow.
The question is, can anyone get a car loan? Use this guide to find out what you should consider before applying for a car loan and the likelihood of being approved.
Risk versus reward
Have a think about how much you need to spend on your car. A go-to rule is to spend no more than 35% of your annual income. Make sure you can afford the monthly repayments in addition to your other bills. Are you sure your income and expenses will remain the same throughout the whole term of the loan? If your circumstances change, could you still afford this additional debt? When considering your application, lenders always like to see that you have chosen a loan you can afford and that suits your financial circumstances.
Be earning over $25,000 per year from a regular source of income that you can demonstrate
Have a good credit history
Plenti will consider a loan application if you are self-employed. Additional credit assessment criteria and requirements may apply.
The fine details
To obtain a car loan, you’ll need to provide details about the car you’re buying, proof of identity and evidence that you’re able to make repayments. The type of information that you’ll be asked to provide includes:
Keep in mind, lenders might need to speak to your employer, landlord and/or accountant to make sure your information is accurate and to check your credit history.
Know the score
It pays to check your credit score before applying for a car loan.
Your credit score is a number that sums up the information on your credit report. It takes into account information like the number of credit applications you’ve made and the amount of money you’ve borrowed. It also notes your history of repaying debts on time. Basically, it tells the lender whether or not you are a trustworthy borrower.
You can get a copy of your credit report and credit score for free every 3 months. Check your credit report by contacting one of these credit reporting agencies:
Proof of identity (passport or driver’s license)
Proof of income (pay slip or tax return)
Assets (such as property, vehicles or jewellery)
Other debts (credit cards and loans)
Regular expenses (rent and bills)
Bank statements to show savings and repayments made in the past on loans or credit cards
Simply call to get your credit score on the spot or access your report online within a day or two. You could have to wait up to 10 days to get your report by email or mail. Checking your credit report will NOT impact your credit score.
Alternatively, you can find out your credit score online for free through government financial guidance site Moneysmart, or financial comparison sites like Canstar.
If you have a low credit score, you could be stung with higher interest rates so it may be worth working on improving your score before you buy. You can do this by:
Equifax: phone 138 332
illion: phone 132 333
Experian: phone 1300 783 684
All of these things will help your credit score to improve over time, giving you a greater chance of being approved for a car loan and securing a competitive interest rate.
Take the step
At Plenti, your first step in applying for a car loan is to request a RateEstimate. Your RateEstimate assesses whether you’re eligible to apply for a loan with Plenti. We simply ask you a few questions so we can calculate an initial estimate of your borrowing potential, along with the rates, fees and charges that may apply to your loan.
Requesting a RateEstimate won’t impact your credit score and there’s absolutely no obligation for you to proceed with a loan application. It’s free, secure, and only takes one minute to complete.