What Lenders Look at When Assessing a Car Loan Application in Australia


When considering a Car Loan Application, there are a few things that all lenders will look at before approving or declining.

Here are the 5 main things that all lenders will look at when assessing a Car Loan Application in Australia.

1. Income

The first thing that a lender will look at when assessing a car loan application is your income. A lender wants to know if you can service the required loan repayments or not. To apply for a Car Loan or any loan for that matter, you will need to provide your latest pay slip and any other external income that you currently earn. Some lenders may just look at your bank statements, others may require further documentation.

Any type of income you earn, whether it be your job, side hustles, freelance jobs etc., be sure to have formal documents that you can submit to the lender.

2. Financial Commitments

This is where it often goes wrong for so many Car Loan Applicants. The second thing that all lenders will look at when assessing a car loan application is your current financial commitments and expenses. A lender will take your applications income statement and measure that against your current financial commitments to see if you are financially able to pay off a loan. This is often referred to your debt to income ratio.

To increase your chance of receiving a loan approval it is important that you try to limit your costs where possible. Pay off your credit cards, try to get rid of any other loans you may have, anything you can do to limit your expenses do it!

3. Employment History

It may surprise you to hear this, but a lender will often look at your employment history to gage your income stream overtime. A lender wants to see that you have the means to service the loan over the length of the agreement. If you work for a year than have no income for a year, you will look like a risk to a lender, so it’s vital that you document your places of employment and how much you earn as best as possible.

Each lender will have their own criteria of how many past jobs you need to list. It is always best practice to have the information ready in case your lender asks for it to process your application further. Having a stable job will help you significantly when applying for a car loan in Australia.

4. Savings

Believe it or not a lender will look at how much you have in savings. Having a savings amount built up will show a lender that you can prioritise your spending, which ultimately decreases your risk of defaulting on the loan.

If you are trying to get a loan to buy a car, it is always good to build your savings as much as possible. Not only will it limit the amount that you need to borrow but it is one of the essential criteria that all lenders will look at and judge your application on.

5. Deposit

This is arguably one of the most important points. Having some sort of deposit available will help you considerably when applying for Car Finance. Generally, lenders will not lend 100% of the funds for a vehicle purchase mainly due to vehicle depreciation. Meaning, if you default, they are unable to sell the car to recoup their initial investment.

To increase your chances of receiving approval for a car loan it is important to save a deposit for a car. Try to aim for a 10 – 20% deposit. The benefit of having a deposit is it ultimately decreases the amount that you need to borrow from a lender, plus it reduces the amount of money you will need to pay on a monthly basis!

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Final Word,

When it comes to approving a loan there are 5 key things that all lenders will look at and consider. A lender will look at your income against your expenses, your employment history, how much savings you have and how much you have for a deposit.

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DISCLAIMER: This is all based on opinion please research and consult with all relevant parties to make the best lending decision.