Ready to get yourself a new set of wheels? Great news!
But before you put in your application for a car loan, there are absolutely a few things you need to take into consideration. For example, should you approach a ‘big 4’ bank, go with the financing at the dealership, or save a heck of a lot of money and chat to a finance broker (like us, on 1300 787 288)?
Another thing to think about is how certain factors come into play that may determine the interest rate you get on your loan. Which, of course, will in turn determine how much your monthly repayments are.
5 factors lenders consider when you apply for a car loan
You might not be aware of this, but each person that applies for the exact same car loan package can actually be offered a different interest rate. So how is this possible? Well, there are a few reasons for this - let’s get into them now.
1. Your credit score
We’ve discussed credit scores ad nauseum in previous articles so we won’t bog you down with too many details, but applying for a loan with a less than favourable credit score versus one that’s on the other end of the scale will make a big difference in your interest rate.
Make sure you’re putting your best foot forward by first checking on the status of your credit score. Wherever possible, work to improve it before you put in your application - it might end up saving you a decent chunk of change.
2. Length of the loan
Generally, the shorter the term of the loan is the lower the interest rate. If you’re able to, take out a loan with the minimum length possible as this will in turn minimise how much interest you pay over the life of the loan.
3. Your salary/income
Thinking from a lender’s perspective for a moment, the higher the chance that a loan applicant can pay their instalments on time each month, the more secure you’d feel to loan them the money in the first place, right?
Which is why applicants who not only have a good income but also a stable, full-time job will be looked at much more favourably by lenders and, as such, may see a lower interest rate on their loan.
4. Upfront payment
Putting down a sizable down payment can be a great way to show prospective lenders that you’re good with money (after all, you had the financial sense to save a large amount) and will also drastically reduce the total amount you need for the loan, helping reduce your overall interest paid.
5. Talking to a finance broker
Right, now it’s time to pump up our tyres a bit. And with good reason!
Approaching your bank for a loan, you’re limiting yourself to the few loan packages they have and the interest rates that accompany them. But engaging with a quality finance broker means opening up a door that leads to hundreds of lenders and thousands of finance packages.
At Stratton Finance, we’ll tap into our extensive network of lenders so we can match you with the perfect car loan to suit your needs.
Speak with the car financing experts at Stratton Finance today
If you’re thinking about applying for a car loan, we’re here to help. With more than 2 decades of experience working with Australians just like yourself to secure the best car financing package, you can rest assured we have the knowledge it takes to achieve the best results for you too.
Give our friendly team a call today on 1300 787 288 or send us an online enquiry and we’ll be in touch with you as soon as we can.