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8 Tips For Your First Car Loan Application
February 24, 2021●
5 minute read●
Buying a car is always a very exciting experience. If you’re applying for your first car loan, it can seem overwhelming if you are unfamiliar with the processes. You may be unsure what the assessors will be looking for and what will give you the best chance of approval. Here are 8 tips to get approved for your first car loan.
Set a realistic budget
One thing that lenders will look at is how much you can afford to spend on car loan repayments. While you might want a Mercedes, you may only be able to afford a Suzuki. Set a reasonable and realistic budget that you can stick to comfortably for the life of your car loan. If you apply for a car you simply cannot afford, lenders will be unable to approve your loan application.
Check the lender’s eligibility requirements
All lenders will have their own set of loan eligibility requirements. Usually, these will include being over 18 years old, being an Australian citizen or permanent resident and having a consistent income. However, this will vary from lender to lender. Even if you can afford your car loan repayments, if you do not meet the lenders’ eligibility requirements, you will not be approved for a car loan.
Save a good deposit
If you can save up a hefty down payment on the vehicle, you have a greater chance of approval. This is because it shows the lender that you can responsibly save money, and that you have less money to repay over the span of your car loan. The less money you need to borrow and therefore repay, the less ‘risky’ you are as a borrower. This is because it is less likely you will have trouble repaying your loan.
Limit your applications
If you’re extremely keen on getting approved for a car loan, you may think applying for as many as possible gives you the greatest chance of being approved by one. Unfortunately, car loans don’t quite work that way. The more loans you apply for, the less likely you are to get approved. This is because every time you apply for a loan, lenders conduct a credit check which shows up on your credit report. The more ‘hard inquiries’ on your credit report, the more this negatively impacts your credit score. A poor credit score makes borrowing money more difficult and your options much more limited.
Check your credit score
It is important to know what your credit score is. If this is your first car loan, it is likely your first loan ever. Do you know what your credit score is? It’s important to know what your credit score is and what that means so that you know what your loan options are. If you have a credit card in which you have defaulted or missed payments, this has likely negatively impacted your credit score. However, if you have repaid all of your bills on time, credit card payments on time, and any other financial commitments you may have, you will likely have a good credit rating.
It’s important to know and understand your credit because, with bad credit, your borrowing options are limited. You will likely need to apply for a car loan through an alternative lender, like Jacaranda Finance, that can be more lenient in their credit score requirements. If you’re not sure what your credit score means, this is a breakdown of credit scores from Equifax and Experian (two of the major credit bureaus).
Research the car loans available
Before you apply for your first car loan, it is important to know your options. There are hundreds of car loan options available to you. In order to get the best possible deal, it’s important to know what they all are and whether you qualify for them. Research for car loans that are applicable for your circumstances, for example, ‘car loans with bad credit’ or ‘car loans for casual workers’. When you know what is available to you, you can make a more informed decision. This limits the need for multiple applications and ensures that you know the lender’s requirements.
Research the car you want
Another important factor other than the price of the car you are purchasing is its running costs. What kind of petrol does it take? How much is it to insure? Will it be expensive to service/fix if it experiences any problems? Is it a reliable car? These are all very important questions that you must consider before you apply for a car loan. Lenders will factor in these costs as well as the price of the vehicle. If you are unable to pay the costs of running the car, you will find it difficult to find approval from a car lender.
Improve your credit
If you have a bad credit score, you will have more limited options in terms of loan options. You may choose to try to improve your credit score. Here are some tips to help you do so according to Experian:
- Pay your bills on time
- Get credit for making utility and cell phone payments on time
- Pay off debt and keep balances low on credit cards and other revolving credit
- Apply for and open new credit accounts only as needed
- Don’t close unused credit cards
- Don’t apply for too much new credit, resulting in multiple inquiries
- Dispute any inaccuracies on your credit reports
Car loans with Jacaranda Finance
Jacaranda Finance offers car loans online from $5,000 to $35,000 for both new and used cars. No matter your financial situation, we will give you a full assessment to determine if the loan you’re applying for is affordable for you. We offer flexible repayment terms, from 1 to 4 years, so you can repay your loan at your own pace.
Our application process is simple and easy with our 100% online application form. It takes less than 8 minutes to complete and requires no long waiting times or physical paperwork. All you need to apply is some spare time and a device with an internet connection. We are extremely speedy with our application processing times so you can be in your dream car in no time!
Written by Jacaranda Team