cars, utes

Hansy Mannil Dec 1, 2023

Obtaining a car loan in Australia is a common practice for individuals looking to purchase a vehicle. However, the approval process can be complex, and lenders will consider several factors when assessing a loan. Understanding these factors can help potential borrowers navigate the loan application process more effectively and increase their chances of obtaining a loan approval.

This article will provide some handy hints on the elements lenders may consider when evaluating car loan applications in Australia.

Credit History


One important factor in car loan approvals is the borrower's credit history. Lenders assess an applicant's creditworthiness by reviewing their credit score, which is determined by their past credit behavior. A strong credit history, characterized by a high credit score, timely payments, low credit utilization, and a minimal number of credit inquiries, may increase the likelihood of a loan approval along with the other important factors to consider. On the other hand, a poor credit history, such as a low credit score, missed payments, or defaults, can make it challenging to secure a car loan or may result in approvals for loans with a higher interest rate. Paying existing debts on time and minimising new debt prior to applying for a car loan can improve your credit score and assist with your loan application.

You can find out more about credit scores at 

You can use our online car loan calculator or complete a car financing enquiry with us to get an indication of what the interest rate on your car loan could be.  There is no commitment to take out a vehicle loan, and we can provide you with your current credit score as part of the process without impacting your credit score.

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Income and Employment Stability

Lenders evaluate an applicant's income and employment stability to assess their ability to repay the car loan as part of their responsible lending obligations. A steady and sufficient income source is required to demonstrate that the borrower can afford proposed monthly loan payment. Employment stability, including the duration of current employment and a history of consistent income, can also be an important factor for loan approval. Self-employed individuals may need to provide additional documentation, such as tax returns and financial statements, to demonstrate their income.

Find out more about Car Loan for self-employed here.


Debt-to-Income Ratio


The debt-to-income (DTI) ratio is a metric that lenders consider when assessing an individual's loan eligibility. This ratio represents the proportion of a borrower's monthly debt payments to their monthly income. Lenders look for borrowers with a lower DTI ratio, as it indicates a more manageable level of debt compared to their regular income. 

Age of Vehicle

If you are looking at a loan for a new car, you may be able to benefit from lower interest rates, longer loan periods, and larger loan-to-value ratios. You will also benefit from a manufacturer warrant.

If you are looking at financing an older car, you will usually be offered higher interest rates, shorter loan durations, and lower loan-to-value ratios than for a new car loan. Some lenders have a maximum age limit for cars, so check ahead.

Click here to compare potential interest rates on used and new cars going through our online quoting tool.

Loan-to-Value Ratio

The loan-to-value (LTV) ratio is another factor lenders consider when assessing a loan application. It compares the loan amount requested by the borrower to the value of the vehicle being financed. Lenders typically prefer a lower LTV ratio, as it reduces the risk of shortfall in the event of default or repossession. Providing a higher deposit can help lower the LTV ratio if you are able to do this. 

Loan Term and Interest Rates


The loan term and interest rates offered by lenders can vary significantly and have a direct impact on the overall cost of the loan. Shorter loan terms generally result in higher monthly payments, but lower total interest paid over the life of the loan. On the other hand, longer loan terms can offer lower monthly payments but may lead to higher overall interest costs. Additionally, the interest rate depends on several factors, including the borrower's creditworthiness, market conditions, and the lender's pricing strategy. A lower interest rate can make a significant difference in the affordability of the car loan.

Stratton Finance knows exactly how to find your financing package

Whether you are after a loan term of two years, seven or anything in between, we’ve got the expertise to help find the car financing deal that aligns with your needs. Our team will help you through the process from start to finish, answering any questions you may have for us along the way.

So, find out today what the monthly repayments could be using our car financing quote tool. You can change the loan term to see how it affects repayment amounts to assist with your budgeting requirements.

If you would like to find out more about personal or commercial vehicle financing, please get in touch with us today by calling 1300 787 288 or sending us a message online to which you will receive a response within [insert timeframe e.g. 1 business day or same business day]

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Information is current as at 19 July 2023 and subject to change.

All applications are subject to loan assessment, eligibility criteria and lending limits.  Terms, conditions, fees and charges apply.

Information provided is factual information only and not intended to imply any recommendation about any financial product(s) or constitute tax advice.  If you require financial or tax advice you should consult a licenced financial or tax adviser.

Stratton Finance ACN 070 636 903 / Australian Credit Licence no. 364340


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