subject: How Can I Get a Car Loan? [print this page] All car loans in Australia are governed by strict government requirements and lenders must be sure that you can repay a loan without suffering undue hardship. This means that you will have to satisfy the lender that your income is sufficient to not only cover the cost of the loan repayments, but also sufficient to take care of everyday living expenses.
It is incumbent upon every lender to investigate your overall financial situation before making a decision so you will have to provide them with evidence of all of your liabilities and income when you apply for a loan.
Of all the financial products on the market, car loans are often the easiest to qualify for because the lender can take an interest in the motor vehicle and sell it if you default on the repayments. This added security makes it easier for the lender to approve a loan, but it does not release them from the responsibility of having to investigate your personal circumstances before approving a loan.
There are two different types of car loans.
* Secured personal loans. This means that the lender takes a mortgage over your vehicle which gives them the right to sell the vehicle if you are unable to make your repayments.
* Unsecured personal loans. A lender might decide to approve your loan even without taking a security over your vehicle. This means that your asset position is quite strong and the bank is willing to take a risk on you. Nevertheless, the interest rates that apply to unsecured personal loans are generally higher because of the risk involved.
Whichever type of loan you apply for, you will still have to satisfy the lenders internal requirements, these include all of the following.
* Proof of income. In general terms, a successful applicant will need to demonstrate a good employment history, usually released 12 months and preferably with the same employer. Proof of income usually includes the latest payslips as well as the last years PAYG summary.
* Statement of assets and liabilities. Every loan application will contain a section where you will have to complete a list of everything you own and all existing liabilities, including HECS obligations. Credit cards are assumed to be at their maximum limit by every lender so if you have a credit card with a very high limit, you can expect to have your borrowing capacity reduced accordingly.
* A good credit history. Every lender checks your credit history with Australia's central reporting agency. The agency report includes every application you have made for Finance over the last 5 years and whether you have had any payment defaults or court judgements issued against you. If your report includes a default, or worse, bankruptcy, it is unlikely your loan will be approved.
As stated previously, every car finance application is judged individually and every lender has their own particular credit policies. This means that if you are declined by one lender it may still be possible to obtain approvals somewhere else. The important thing to remember is that you have all your evidence ready to go when you lodge your car finance application.
