To get a car loan, set your budget, check your credit file, get pre-approval, choose the car and then finalise the loan. A secured car loan uses the car as security and usually comes with a lower rate than an unsecured personal loan.
Buying a car is exciting. Organising the finance usually isn’t. Getting it sorted before you walk into the dealership can save you money and a lot of pressure on the day.
How to get a car loan, step by step
- Work out your budget. Look at the full cost of owning the car, not just the repayment. Insurance, rego, fuel and servicing all add up.
- Check your credit file. You can get a copy of your credit report at no cost from the credit reporting bodies. Fix any errors before you apply.
- Get pre-approval. Pre-approval tells you how much a lender is likely to lend, so you can shop with confidence and negotiate like a cash buyer. Pre-approval is not a loan offer. Final approval still depends on the car and your circumstances.
- Choose the car. New or used, from a dealer or a private seller. Lenders have rules on the age and type of car they will finance.
- Finalise the loan. The lender checks the car details, issues the loan documents and pays the seller.
What lenders look at
- your income and how stable it is
- your existing debts and living expenses
- your credit history
- the car itself, including its age and value
- any deposit or trade-in you are putting in
Secured or unsecured?
A secured car loan uses the car as security. If the loan isn’t repaid, the lender can repossess and sell the car. Because the lender’s risk is lower, secured loans usually come with lower rates than unsecured personal loans.
An unsecured personal loan doesn’t use the car as security. Rates are usually higher, but there are fewer rules about the car you buy.
Each lender sets a maximum age for the cars it will accept as security. Older cars are often financed with an unsecured loan instead.
Hot Tip: Security works a bit like a rental bond. The lender is more relaxed because it has something to fall back on. In return you get a lower rate.
Dealer finance or a broker?
Dealer finance is convenient. The catch is that the dealer usually works with a small number of lenders and may earn a commission on the loan. A broker can compare options across a wider panel. Either way, compare the comparison rate and the total cost of the loan, not just the repayment.
Balloon payments
Some car loans include a balloon payment: a lump sum due at the end of the term. It lowers your repayments along the way, but you need a plan to pay it, refinance it or sell the car when it falls due.
What if you can’t make the repayments?
Contact your lender as early as you can. Lenders have hardship options, such as reduced repayments for a period. With a secured loan, repossession is a last resort. It is still a real risk if repayments stop. The National Debt Helpline (1800 007 007) is a no-cost service that can help.
How we can help
We compare car loans across our lender panel, help with pre-approval and explain the total cost before you sign. Read more about car loans, see refinancing or paying off a car loan early or book a complimentary review.
How Time Home Loans can help
Whichever kind of car loan suits you best, Time Home Loans can help you secure it. As a home and car loan broker in Australia, we help you navigate the complexities of car finance to help you make the best possible decision. We offer loan repayments to suit your cash flow, with competitive interest rates and finance available for both new and used vehicles. You may even be able to access 100% finance without needing a deposit or additional security.
Whether you’re looking for an in-depth answer to the question “how do you get a car loan?”, or you’re ready for your personal customised lending experience, book online with Time Home Loans.
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