Thinking of applying for a car loan? Buying a car is one of the biggest investments we make but for many people buying a car is not achievable without car financing. Before you start looking for your next dream car there are many things you need to know before applying for car finance.
Shop for Cars as put together a quick guide on how to get a car on finance in Australia.
The first thing that any car finance lender will look at is your credit score. A credit score is a number that is used to represent your reputation as a borrower. The higher your credit score the more likely you are to be approved by the lender.
Lenders determine your credit score on your past credit history. Some of the area’s lenders will look at is your current levels of debt, how many accounts or credit cards you currently have and most importantly your repayment history. If a lender can see you have a history of not paying expenses on time, they will be less likely to offer you financing on your dream vehicle.
Some of the ways that you can improve your credit score is buy paying debts on time, limiting your credit card transactions and checking your credit report for any inaccuracies. It’s important to know that some lenders may determine your credit score differently, so it is so important you consult with all relevant parties to get the best accurate score prior to looking for your next vehicle.
Credit scores between 666 and 1200 are considered likely to get car loan approval. If you are under this number, you may still be eligible for a car loan. It is important you seek more information from your lender or the relevant party.
In Australia there are over 50 car financing lenders available to buyers. As such, all the different lenders could offer applicants different financing rates on their loans. The lenders are looking to increase their market share so many will offer better rates to get your application. Some deals could save you thousands in interest repayments in the long run, so it is so important you look at all the different rates available.
The average car finance rate in 2021 is between 5% and 17%. Your credit score will determine the rate you will need to pay. Along with the interest rate some lenders may charge ongoing or upfront fees. It’s so important that prior to applying for a loan you understand all the ongoing costings and interest rates on the market prior to applying.
It’s always best to go to a lender with some form of deposit. Having a reasonable deposit for the car you are looking to purchase will limit your overall loan costs and interest repayments. It also shows the lender you have a history of saving an amount. A good deposit for a car is between 10 and 20% of the cars price. However, there are some lenders in the market that do offer no upfront deposit however you may be forced into a higher interest rate.
Before you even look at the loans available in the market you will need to understand all the costs associated with servicing the loan. You will need to calculate your weekly, fortnight or monthly repayment as well as the different monthly fees of the loan. You will also need to consider how much you can further afford if the rate changes at a later date.
There are free loan calculators available online that give you a rough estimate of your weekly repayments based on your loan amount and interest rate.
There’s not much worse than looking for your dream car and finding out later that the car is outside your reach. Before looking for your next car you should consider applying for pre-approval. The benefit of pre-approval is it gives you a correct understanding on how much you can borrow and guarantees you have finance to cover the car.
Getting car finance can be a challenging experience. Before you consider applying for a car loan it is highly recommended that you understand your credit history, the loans on offer and you have a reasonable deposit.
Shop for Cars has partnered with Drive On Finance, which connects you to 40 lenders instantly through a single loan application. You can complete the entire process in under 10 minutes! The team will then offer you the best loan applications in the market. If you don’t like it you can walk away! Zero obligation.
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DISCLAIMER: This is all based on opinion please research and consult with all relevant parties to make the best buying decision.