We get asked this question a lot. So, we thought that we would put together a quick list of some things to help you understand how to attack this issue.
One thing that we can be sure about is that no two credit files are the same, think of it like your financial fingerprint. This also means that what might seem like bad credit history for one person means something totally different for another person. Therefore, if you feel like you may have some issues sitting on your credit file, but you’re not too sure, you need to speak with one of our Lending Specialists before doing anything. Our team can provide you with a free copy of your credit file to educate you on how your financial footprint appears to lenders and banks.
Applying for more credit without the knowledge of what you need to do to obtain the finance is what many of Australian’s are doing every day, and we see firsthand how much it is hurting their chances of getting the very best car loan.
Here are some of our quick tips to give you an understanding of what you can do to have the best chance of getting your car loan.
It’s all about giving the lender confidence.
Lenders look at 5 main things, in our industry we call it the 5 C’s. Capacity, Character, Collateral, Capital and Conditions. Let’s take a quick look at these individually.
Put simply, Capacity is your ability to afford the loan. As your Broker, it’s our job to prove without doubt that you can afford this car loan based on how much income you bring into your household versus how much money you spend each month. Basically, if you are applying for a car loan that you will have to invest $75 per week into, then the lender will want to know that you already have that much Capacity within your budget right now.
This is about proving to the lender that you have good intent to repay the loan. Having previous bad credit can affect your ability to prove this, but as your Broker, it’s our job to totally understand what was happening at that time that you had bad credit so we can help you build this Character back up in the eyes of the prospective lender.
When you get your car loan, it is likely that the lender will want to take security over the car. What the car is in lender terms is Collateral. By you offering the car as security against the loan, it can give the lender some comfort that if things did go bad, that they have an asset to recover and recoup their money. This is very normal in car loan lending and is used for people with both excellent and poor credit ratings.
When you are purchasing your car, if you can offer a deposit on the car, what you are effectively doing is offering capital towards the purchase. Being able to add your own Capital into the equation can show the lender that you have had a savings plan in place to be to offer this and in turn have the extra Capacity already to repay the loan. For a lender, it also means that you have put some of your hard-earned cash into the deal.
On the surface, having a high interest car loan with higher fees is not attractive to everyone. However, with the right help and understanding from your Broker, you can use this loan as a stepping stone into a much lower rate car loan. In some cases, you could only require the bad credit car loan for as little as 12 months before being able to have your Broker help you refinance your initial loan into an even better car loan. The important part in this conditions step is that you keep making every repayment that you are required to, so you continue to build your credit rating back up. Being able to meet these Conditions is critical, so it’s just as critical to have someone in your corner to help you with this. With one of our Lending Specialists in your corner, you are not alone in this journey.
Be willing to be honest with your Broker. Tell them everything transparently about what was happening for you when you fell on hard times and created a bad credit rating. We are human too; we understand that bad things happen to good people. With the full story upfront, we are in a much better position to help you.
If you can meet most of the things mentioned above, but miss on one or two of them, offering a solid family Guarantor can mean the difference between hitting the road in your new car or not. If you have a family member that is prepared to go as Guarantor for you on the loan, they will need to have a good credit rating and have the Capacity to pay the loan if you ever default on the loan.
There is a lot of responsibility that comes along with being a Guarantor, including being responsible for the loan repayment if the applicant doesn’t make the repayment on time. If you have someone that would help you, this could be what gives the lender the level of comfort to help you with your car loan.
If you have questions and would like to speak with one of our Lending Specialists, please reach out to one of the team on 1300 665 906. We have an obligation free service to help you with your bad credit car loan. What that means is that if you are not happy with what we can arrange for you, then you do not have to proceed with the loan approval and the application process has cost you nothing.
If you’d like to apply online right now for your car loan, click here.
If you would like to know more information you can also download free our eBook, “How to Get Your Loan Approved Even with Bad Credit.”
Nathan joined Fox Finance Group in 2018 to help drive the strategic growth of the business and also help build on the solid foundations that have held strong in the business since 2006.