How to increase your chances of car loan approval
Applying for car finance can be a nail-biting experience as you wonder ‘will my car loan be approved?’ But while every lender has its own set of criteria for assessing credit applications, there are ways you can boost your chances of getting the green light.
Check your credit report
Your credit report plays a big role in the car finance approval process, as lenders examine it when you make an application. They use the information in there to calculate your credit score. So if you have a poor credit history then you’ll be more likely to get rejected.
Improve your credit score
If your credit score is on the low side, you may want to improve it before you apply for a car loan. That means paying down any outstanding debts, paying bills and other repayments on time, and avoiding making multiple applications for credit over a short time frame. You should also scrutinise your credit report for any errors – as these can drag down your score. If you do spot any mistakes, contact the credit reporting bureau directly to get them corrected.
Reduce debt as much as possible
Lenders want to see you’re financially responsible. And one way they check that is by looking at your debt burden in relation to your income. If it’s high, they are more likely to say no when they assess your application. Pay down your debt by making more than the minimum monthly repayment on your credit card and other loans.
Save up for a bigger deposit
The bigger your deposit, the less money you have to borrow from the lender. That doesn’t just make you a less risky borrower, improving your chances of getting approved. It can also reduce your monthly repayments and the rate you get charged on the loan. Win-win.
Ask a friend or relative to go guarantor
If you have a poor or limited credit history, it can be a struggle to get approval for a car loan. Improve your odds by having a relative or a friend go guarantor on your loan. But beware – it’s a big ask as it comes with financial risk. Should you default on the loan, your guarantor will be legally liable for the outstanding loan balance. Lenders will want your guarantor to have a good credit history and a stable income.
Only apply for loans you can afford
Lenders look at your income and outgoings when they assess your application. This is to check what you can afford in repayments each month. So, if you’re stretching yourself too far, the lender is likely to have concerns. Use a car loan calculator to run your numbers before you apply. Don’t forget to include the car’s running and maintenance expenses in your budget.
Choose the right loan
Car loans come in all shapes and sizes, including secured or unsecured, fixed rate or variable. While it can be confusing, it’s important to choose the right type that suits your circumstances. Speak to an expert broker like National Loans to help make sense of it all.
Choose the right lender
Different lenders take different approaches to risk. So while you might get knocked back by one lender, another will be happy to accept you. As you don’t want to make multiple applications and thereby damage your credit score, you need to get it right first time. That’s why you should work with National Loans.
Want to get first-time approval on your car loan? National Loans can help – even if your credit score is less than perfect. Click here for a free online quote. If you want help, please fill in this online form or contact National Loans on 1300 358 358.