If you're not sure if you're eligible for car finance, there are a few things you should know and can do about it. The basics are covered in this article we posted last June and we're here to give you more tips to increase your chances of getting approved! Whether you've had bad credit, are a first time applicant, are self-employed, or a non-Australian resident; here are five things you can do get car finance:
1. Clear your debts and pad your savings
One of the biggest factors into whether or not you will be approved, or even how much your interest rate will be is your track record with debt. The best way to combat this is by paying off or showing the broker or lender that you are currently paying off existing debt. Even better if you have a savings account or at least have the paperwork to show that you can open a savings account. Demonstrating the capability to save (disposable income), and therefore pay off a car loan, goes a long way in showing financial stability and thus car finance approval.
2. Be realistic with your budget
You may need large family car right now, but if the lender sees that you can only and realistically afford a compact car, they are going to reject you. Remember that there's more to it than just the vehicle repayments. Consider insurance, registration, petrol, and all other costs that come with actually owning a car. If you ask for too much, the broker will think you irresponsible and will be less inclined to approve your application.
3. Be prepared to use a guarantor or collateral
Sometimes you just need to opt for a secured loan, which means you need to prepare a collateral or use your vehicle as collateral. If you choose the latter of the two, the lender will repossess your vehicle if you default on your car loan. If you are a first-time borrower or are under 25, you may need to find someone to guarantee the loan on your behalf.
4. Don't apply.. Yet
While some people like to apply to several lenders at once to try and get a price beat, if you have or had troubles with bad credit this may not be the best course of action for you. Applications lead to credit checks which can lead to multiple rejections if you're not careful. If multiple rejections show up in your credit history, it will make lenders question your capability to handle a car lease.
5. Know your credit history!
Again, one of the biggest factors on whether or not you'll get a car loan approved, or how high your interest rate will be is your credit history. While this takes some effort on your part, it pays to do your own homework as credit history reports often contain mistakes. ASIC's MoneySmart says that creditors may incorrectly report defaults, fail to notify you of any "outstanding debts" (whether true or not), or simply forget to update your records. If you check all of these yourself, you won't be in danger of unwittingly and unjustly having a black mark on your credit history. Remember that while it is their job to update records, it is ultimately your responsibility to keep your credit history on track.