Applying for a car loan is no easy procedure, with borrowers required to jump through numerous hoops in order to establish themselves as a trusty candidate. And now that interest rates are rising, there is sure to be even greater scrutiny of every application to ensure applicants can service their debt.
With that, not everyone manages to make it through the application process. While there are a variety of reasons, some within a borrower’s control, others not, it’s vital you don’t make these common car loan application mistakes.
Not getting pre-approval for your car loan
Rather than chancing it to see whether you might be able to secure a loan, consider the prospect of pre-approval. This sort of conditional car loan application will make it clear exactly where you stand. That is, how much a lender is willing to lend you.
Ultimately this will dictate which cars you go out into the market looking for.
Not putting forward a deposit
Although you’re not necessarily obliged to put down a deposit for a car loan, a financier will look upon you far more favourably if you do. This is because you are reducing their risk exposure. They will still have claim to the car in the event of a default, all the while without lending more than they otherwise would have.
Not researching your credit history
One of the major contributors towards the success of your loan application is your credit score. Like it or not, this is a guiding factor in not only the decision, but the size of any finance offered. If it happens to fall below the threshold considered “good” – a score of 622 – then a lender could reject your application altogether, or couple the loan with a significantly higher interest rate.
At the same time, the financier will also look at your broader credit report, to see how many lines of finance you currently hold, and your general repayments history including any late payments or defaults. Check this yourself before you apply for a loan and seek to improve your standing first, and immediately report any errors.
Not gauging your ability to make repayments
A lender will take a close look at your existing financial situation, including any other debt you have, as well as your primary source of income. They may even take a look into your outgoings or expected outgoings (e.g. car insurance, registration), since this has an influence on your ability to make repayments. Before approaching a lender it is best to ensure you have a stable financial backing.
Not applying for the right loan product
No matter how many loans you have applied for in the past, make sure that you are eligible for the one you are requesting. Each lender has different prerequisites and conditions to their offer of finance, so what flies with one financier, might not necessarily be the case with another.
It’s also important that you take into account the purpose of the vehicle in deciding which form of finance to pursue, and whether you’re suited to the type of loan in question.
The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.