Getting approved for a car loan is not just about having a perfect credit score. Lenders look at a range of factors, and understanding what they want can significantly improve your chances of approval.
Whether you are a first-time buyer or have had credit challenges in the past, this guide will help you understand the approval process and what you can do to put your best foot forward.
What Lenders Look For
Before you apply, it helps to understand how lenders assess applications. While each lender has their own criteria, most look at similar factors.
- Income and employment stability - Can you afford the repayments?
- Credit history - How have you handled credit in the past?
- Living expenses - What are your ongoing financial commitments?
- Deposit amount - How much can you put down upfront?
- The vehicle itself - Age, kilometres, and value of the car
Improve Your Chances of Approval
There are several things you can do before applying to strengthen your application.
Check Your Credit Report
Get a free copy of your credit report and check for errors. Dispute any mistakes before applying. Even small errors can affect your score.
Reduce Existing Debt
Pay down credit cards and other debts if possible. Lenders look at your debt-to-income ratio when assessing affordability.
Save a Deposit
Even a small deposit of 10-20% can improve your options. It reduces the lender risk and may get you a better rate.
Stabilise Your Employment
Lenders prefer to see stable employment. If you have recently changed jobs, it may be worth waiting a few months before applying.
Limit Credit Applications
Multiple credit applications in a short period can hurt your credit score. Be strategic about when and where you apply.
Choose the Right Lender
Not all lenders are the same. Banks have strict criteria, while specialist lenders may be more flexible with credit history or employment type.
A finance broker can help match you with lenders who are most likely to approve your application based on your specific circumstances. This saves you from multiple applications and potential credit score damage.
Prepare Your Documents
Having your documents ready can speed up the process and show lenders you are organised.
- Photo ID (driver licence or passport)
- Recent payslips (usually last 2-3)
- Bank statements (usually last 90 days)
- Proof of address (utility bill or similar)
- Details of the car you want to buy (if known)
What If You Have Bad Credit?
Having bad credit does not mean you cannot get a car loan. Specialist lenders exist specifically to help people with credit challenges.
You may pay a higher interest rate, but by making consistent repayments, you can improve your credit and potentially refinance to a better rate later.
Key Takeaways
- Check your credit report before applying and fix any errors
- Save a deposit to improve your options and rates
- Understand that different lenders have different criteria
- Use a broker to find lenders suited to your situation
- Bad credit is not the end - specialist lenders can help