It may be your first time purchasing a car, or you may want to change the type of car that you were using earlier. However, when it comes to financing, things are slightly different, and it can make the individuals have an overwhelming feeling.
Don’t worry!
This is not the case, and provided certain requirements are met, obtaining a car loan in Australia can be a piece of cake!
Here is a quick checklist analysis to guide you as to exactly what you will require for a seamless car-buying experience.
Why is a car loan needed?
A car loan is needed because there are many people like you who cannot pay the car amount by themselves. In this case, a car loan can make your purchase easier by providing you with the financial assistance that you need.
However, in order to get a car loan, you have to pass through the eligibility criteria set by each lender. The eligibility criteria may vary based on your income and the lender’s terms and conditions.
Some of the things that are common in all that include:
- You must be 18+.
- A permanent resident of Australia,
- Having an income.
What are the essential documents that you need for a car loan?
If you are applying for a car loan, you have to know that certain kinds of documents will be required by the lender to make sure that you are eligible for the loan. Though each lender has their own requirements, some of the documents are common in all of them. Those are:
Proof of Identity:
Firstly, you have to prove to the lender who you are, your name, age, and birthplace. This is done to affirm that the lender is providing a loan to the correct person. You have to submit personal documents for that.
Personal documents will include:
- Passport
- Driver’s license
- Medicare card
- Birth certificate.
Proof of Income and Employment:
You have to prove to the lender before applying for the loan that you are employed and have an income coming to you. Lenders cannot just give a loan to anyone. Your job can be full-time, part-time, or pension, but it should be your own and come from a good source. This will ensure the lender that you will be able to repay the loan. They may ask you to prove how you spent all the income and how much.
To prove your income and employment, you will be required to display your:
- Recent pay slips (usually of the last 2-3 months)
- Tax returns or notices of assessment (for self-employed applicants)
- Bank statements showing regular deposits from your employer.
Proof of Residence:
Lender will even ask you to prove your residence to analyse your credibility and reachability. You have to keep in mind that you don’t change your house address frequently, as it can give a bad impression to the lenders.
The documents required include:
- Utility bills (electricity, water, or gas)
- Rental agreement or mortgage statement
- Council rates notice.
Assets and Liabilities:
To get more information about you, the lender will also ask you to prove your credit history and whether you are taking any personal loans or have bonds and investments in anything. This can include:
- Credit card statements,
- Details of personal or home loans,
- A list of living expenses such as rent, groceries, and utilities.
Vehicle Details:
While applying for a car loan, you will need to provide information about the car that is to be purchased. These may include:
- Manufacturer of the car
- Car model
- Car year
- Vehicle Identification Number (VIN)
- Car Registration Documents
- Purchase price
- Dealer or seller details.
These documents are applicable for both old or new cars, whichever you are purchasing. This will prove that you are taking the loan amount only for purchasing the car and not for any other use.
Insurance Information:
Lenders may ask you to prove your car insurance and will take the details about the insured car from you. This will give the lender a sense of safety and will be able to provide you the loan without any hesitation.
Credit History:
Your credit score and credit report together help in determining whether you will be approved or denied credit. Depending on the amount, repayment period, and interest rate will be set depending on how creditworthy you are. If your credit rating is slightly below average, ensure that you check your credit history before applying to ensure there are no mistakes.
What are the tips to streamline the process?
Before applying for any car loan, follow the simple steps to get the best car loans. Those include:
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Research and Compare Lenders:
You can start your search by checking different lenders available and then comparing the loan interest, amounts, offers, and discounts of each lender and then choosing the best according to your wish. You can use online tools to compare their terms and analyze them.
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Check Eligibility Criteria:
Each lender has their eligibility criteria. Review each one of them and check which is aligning with your capacity.
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Pre-Approval:
Pre-approval has the benefits of explaining the amount of borrowing power you have in addition to making car buying less complex. With pre-approval, the amount of financing that you can get is already established, so you can easily negotiate with dealers or private parties. Give the necessary financial data to your lender: personal and salary information as well as the credit history. Pre-approval is, however, not the real approval, and there should be no drastic changes to your financial status before the final approval.
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Organize Documents:
This means if you have all the paperwork ready. It will improve the time taken for the loan to be approved. Ensure you scan your copies of identification documents, evidence of income, and residence, plus the details of the car you have the intention of acquiring.
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Check Credit Score:
Your credit score is one of the biggest influences that the lenders consider. To ensure a smooth process of sorting out the loan or grant you needed, challenge any error credited to you. Reduce your credit card balances, refrain from applying for new credit card accounts, and also ensure timely payment before applying for a new card.
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Submit Your Application:
Submit your loan application after you have the above steps. You can wait for further process till the application is approved.
What are the key points to keep in mind while organizing documents?
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Create Digital Copies:
Photocopy all the documents and place them securely in a digital format. It not only provides you with backup storage of your physical discs but also comes in handy whenever the lender requires original copies in electronic format.
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Check for Completeness:
Check each document to make sure that everything is up to date and complete. This will avoid the process from getting delayed.
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Label Everything Clearly:
Label each document clearly and organise them in such a way that the lender doesn’t get confused while verifying the documents.
CONCLUSION:
Arranging the documents beforehand will help you to save your time and choose the right loan deal. It is useful for comparing lenders, making a budget, and obtaining pre-approval, which will help to feel more confident and, yes, use it as a powerful argument during negotiations. Following these steps, you’ll be prepared to drive your dream car in the soonest time possible.
‘Car Finance for Pensioners’ is designed to help you to take the right decision regarding car loans and lenders. If you have more doubts about car loans, feel free to reach out to us or check our website that is specifically designed to help people like you who are opting for a car loan.
FAQs about What do you need for a Car Loan:
- Can I get a car loan with low income?
Yes, you can get a car loan but the process may be a bit difficult.
- What are the eligibility criteria that I have to meet?
You must be a citizen of Australia, above 18 years of age and earn an income.
- What are the documents that I will need to apply for a car loan?
You will need ID proof, residence proof, credit score history, bank statements, car insurance documents and many more.
- What credit score is required to get a car loan in Australia?
Since auto loan guidelines are flexible, there isn’t a minimal credit score for car loans. Ordinarily, a higher score of credit increases your abilities to approve and get good rates of interest.
- Is it possible to take a car loan without making any down payment?
Indeed, there are car loans which require no deposit from the borrowers. But they will again attract high interest rates or come with a lot of conditions. Applicants should provide a deposit wherever it is possible as this improves the application and may lower costs in a given project.
- How long does it normally take to get approval of a car loan?
The approval time takes different duration depending on the lender and how much prepared you are. Also, if you have all your documents in place some lenders can proceed to approve funding requests within the same day or the following one at the latest.
- What is the difference between a secured and unsecured car loan?
Secured Car Loan: They use the car as security which leads to better interest rates being charged.
Unsecured Car Loan: The credit security is not needed, but the interest rates for such a loan are normally higher because of the elevated risk on the part of the money provider.
- Is it possible to pay off my car loan before my repayment period?
Most of the lenders offer a possibility of early repayment, but certain fees may be applied to it. Make sure you read your loan contract before making additional payments.
- What would I do if my loan application is turned down?
If your application was turned down, there is information on why the lender declined it. Retail your credit score, minimize or pay off your debts, seek a guarantor to have an improved application before the next attempt.
