How Do You Get a Car Loan?

A question commonly asked by those in urgent need of a new vehicle for work or personal usage is “how do you get a car loan?”

When it comes time to purchase a new car, most Australians still follow an extremely common pattern.

First, they jump on the Internet, research makes and models and eventually find “the one”.

Next they get to the dealership, and the salesperson says they can sell the car at a lower price if the dealership’s lender handles all the financing.

Sounds great, right?

Wrong!

In almost every case, these unsuspecting customers end up paying the difference. They also pay more in interest and fees over the next few years than they would have if they hadn’t accepted the discount.

It’s an age-old scheme that Time Home Loans can help you avoid with our car finance expertise. As car loan brokers in Australia, we’re here to answer the question “how do you get a car loan?”

How to get a car loan

 A car loan is a personal loan for a new or used car that you have to pay back over a certain period, usually between one to seven years.

So how do you get a car loan?

You can apply for a car loan online, but you still have to meet the minimum lending requirements. For most banks and lenders, this means being over 18, having Australian citizenship or permanent residency and earning a substantial income. By law, lenders are required to ensure any loan they give you won’t put you at financial risk.

Here’s a basic guide to the car loan process, which may vary depending on your situation:

Improve your credit history

Every lender will take your credit score into account, so pay off your loans on time and clear as many debts to your name as possible.

Save for your deposit

A larger deposit means lower monthly repayments and a higher chance of your car loan being approved.

Set your budget

Find out how much you can comfortably afford to borrow and repay.

Gather up ID and documentation

You’ll need documents to prove your identity such as your driver’s licence and passport, as well as proof of income (e.g. pay slips and bank statements).

Choose the right car loan for your situation

Secured or unsecured, with fixed or variable interest rate? (more on the different kinds below). One of the first things you’ll discuss with a lender is which loan best suits your needs.

Get conditional approval for your loan

It’s easy to apply for a car loan online these days, but you can also apply in a branch or over the phone. If the financier is happy with everything you’ve provided, they will offer you conditional approval. With conditional approval, you can start shopping for the car you want.

 What kind of car loan do you need?

 Once you’ve addressed the question of “how do you get a car loan?”, it’s time to decide what kind of car loan suits your situation. There are various types of car loans to choose from, with the four main varieties being:

Secured car loans

If you’re buying a car that’s brand new or close to it, there’s a good chance a secured car loan is your best option. With a secured car loan, a lender has your new car as collateral. If you can’t pay, they can recoup the car.

Unsecured car loans

If you’re buying an older car or don’t want to use the car as collateral, an unsecured car loan means you don’t have to put your asset on the line. Because of the extra risk to the lender, these loans typically come with higher interest rates.

Fixed rate loans

With a fixed rate loan, you maintain the same interest rate throughout your loan term and consistent repayments. This gives you the peace of mind throughout the length of your loan that you’ll always know how much to budget.

Variable rate loans

With a variable rate car loan, your minimum repayments can increase or decrease over the life of your loan. Variable car loans are usually very flexible, with the ability to adjust your payment frequency or pay off your loan early.