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Eligibility for a Car Loan
January 6, 2021● 5 minute read●
The smart thing for any Aussie to do before sending in an application for a car loan is to know out how likely it to get it. Knowing how qualified you are for a vehicle advance can assist you in preparing your form. Going into your application designed gives you an edge and increases your likelihood of receiving the advance you need. Being aware of your eligibility status helps you organize your form better. If you haven’t met the minimum requirement, it can also tell you where you need to make rectification. This article will help you decipher if and when you can get a car loan successfully.
What are the eligibility criteria for a car loan in Australia?
The criteria to get approval for a loan of any sort varies from nation to nation. In Australia, several factors influence the eligibility of an individual. While some of these requirements may be flexible, some set in stone and you cannot bypass them. As a borrower, you ought to know the least requirements and if you can meet them. Those that are enormous obstacles such as age will inevitably require you wait a year or more before applying. Now, let’s look at what they are:
Age: The legal age in Australia, like in most countries, is eighteen years old. Thus no one can get approval for a car loan until they are at least eighteen years. If you are below the legal age, you are automatically ineligible and will be better off waiting till you make the cut-off.
Residency status: Lenders are more likely to approve permanent residents of the country. If you have a temporary visa, you’re less likely to receive affirmation. It’s not impossible, but it is more challenging, and it depends on the status of your passport. If you have a working visa that allows you to earn a decent income, and you’re in the country for a long duration, then you can look into it.
Earning income: Another eligibility criterion is your earning income. The more money you make, the more eligible you are for a car loan because it shows that you have enough capital to pay it off. Of course, if you have more liabilities, i.e. mortgage, dependents, credit card bills, it can also weigh down on your score negatively.
Credit rating: Your credit file gives lenders an idea of your financial status and behaviour. The higher your credit score, the better your chances. People with terrible credit scores might have to look into other options to get a car loan.
The type of loan: Unsecured car loans are riskier for lenders because they can’t hold the car as security, so naturally, it is more restrictive. If you have a bad credit score or low income, you’re better off applying for a secured car loan.
If I’m eligible, what documents do I need to get a car loan?
Should you meet the minimum requirements we’ve outlined above; then you can go ahead and apply for a car loan. It’s essential to prepare when you start the application process, the more organized you look, the more seriously any potential lender will take you. So to help you, here are the documents you should have handy when you head in:
At the top of the list are your identification papers. Lenders need to know who they’re approving for a loan. So you will need a valid means of identification. Most lenders will require something verified by the government like a driver’s license, an international passport, or your health card. Try to take at least two of these with you, as some institutions require more than one means of identification.
You’ll often have to fill a form and provide your personal information, like your full name, age, date of birth and citizenship. Remember that only people above the legal age can apply, and permanent residents are more likely to get approval. Other information they might require your maiden name (where necessary), number of dependents etc.
Evidence of earnings
As we mentioned earlier, lenders are more likely to lean towards people with stable employment that receive regular salaries. But it’s not enough to tell them that you have a steady job, you have to prove that you receive payment regularly from your stated source of income.
Most often to prove that you can repay the loan at regular intervals, they will request your most recent salary slips, and perhaps your bank statement for the last few months. These records often go hand-in-hand with your credit file. So it’s always a good idea to keep those safe and maintain a clean record. If your bank account is currently red, that’s a bad sign. It’s a good idea to keep a safe deposit if they see you take savings seriously, they’re more inclined to trust you, or at least your good financial habits.
Evidence of assets and liabilities
Sometimes how often you receive payment from your job isn’t enough, especially if your day job doesn’t make you at around $50,000 a year. If you have a different asset that generates income for you, the bank or other lender might want proof of it to have a better picture of your financial situation. The more streams of income you have, the better. Likewise, moneylenders strongly encourage borrowers to disclose any liabilities they might have at the time of application.
So don’t be surprised if they ask you for a document detailing your investments portfolio, loans you’re currently paying off, and other similar examples.
Details about the car you want
Part of your loan application involves describing the car you want, so you must go in with something in mind. Moneylenders will want to know the details of the vehicle you wish to purchase so they can compare it to your income, and see if you can pay for it. So you mustn’t list a car that is well out of your budget.
Typically, they require you to provide information about the car’s model, like its year and make which can help them narrow it down. So you have to be more specific than merely stating you want a green car. You might also need to specify if the vehicle you intend to buy is new or used, what the fuel economy is, and even the car’s registration information. Some lenders will even require you already have an invoice for the dealer, so they can confirm how much the vehicle is.
An additional tip is to go with a car that doesn’t require an insurance policy that is too expensive for you to cover. Some borrowers’ application is rejected because the lenders can’t afford to forego a loan if the car is irreparably damaged.
Written by Jacaranda Team