What is a pre-approved car loan?

What is a pre-approved car loan?

Many Aussies set their sights on the car they want to buy before applying for a car loan. Finding out that a lender won’t let you borrow enough to buy the car of your choice can be disappointing. Some people try to prevent this from happening by getting pre-approved for a car loan. If you’re wondering ‘what does getting pre-approved for a car loan mean?’, it simply means the lender signs off on loaning you a certain amount of money.

Pre-approval doesn’t guarantee that you’ll get the car loan but it can help narrow your search by giving you a ballpark figure you may be able to borrow. You’ll still need to make sure that your financial circumstances remain the same between the time you get pre-approved for a car loan and when you’re fully approved.

How does getting pre-approved for a car loan work?

Getting pre-approved for a car loan involves some of the checks that are conducted before a car loan is completely approved. You’ll often need to submit identity documents, as well as bank documents or payslips to prove you have the income to repay the loan. Also, the lender will often wish to do a credit score check. If the lender is satisfied that you are likely to repay the loan, they will offer pre-approval, which is a conditional consent to the loan that is usually valid for a few months.

You will need to shortlist a car within their timeframe and apply for the car loan. The lender will check that the selected car meets their lending criteria, and also confirm that the information provided for your pre-approval hasn’t changed significantly. For instance, if you are buying a used car with a pre-approved loan, then some lenders may insist that it’s no older than seven years.

Again, if you have lost your job or your business income has shrunk, the lender may require you to explain how you plan to make up for the lost income before approving your car loan.

Should I get pre-approved for a car loan?

Considering that only a few lenders offer pre-approval for car loans, you may not find a suitable lender to get a car loan pre-approved. Nevertheless, you may want to look at the advantages and disadvantages of pre-approved car loans.

Some of the advantages include:

  • It simplifies searching for a car by helping specify a suitable price range
  • It gives you the confidence of knowing you can get a car loan before you begin looking
  • It can help with negotiations with car dealers as you don’t need to depend on them for financing options 

At the same time, there are these disadvantages to consider:

  • You can get pre-approved car loans from just a few lenders, which means you may not have the option of holding out for better loan terms
  • Pre-approvals involve a credit score check, which means they will be recorded as an inquiry in your credit report
  • Pre-approvals don’t last very long, which means you may have to find a suitable car faster

How do I get pre-approved for a car loan?

You can apply for a car loan pre-approval online, but you’ll need to have all the documents and financial information readily available.

Also, it may be useful to do some homework before getting started on the car loan pre-approval process. You can research the type of car you want to buy and estimate not just its cost but any additional expenses, including stamp duty, and registration and insurance costs. Through this exercise, you’ll be able to estimate how much you need to borrow.

Keep in mind that you’ll have to pay for operating the car as well.

I got pre-approved for a car loan. Now what?

Once you’re pre-approved, you should confirm how long you have to find a car before the pre-approval expires. This may determine how you approach your car search.

It’s worth asking if there are any additional steps or requirements to move from pre-approval to approval, as this can vary between lenders.

How does getting pre-approval for a car loan affect my credit score?

Whenever you authorise a lender to request a copy of your credit report, the inquiry is listed in your report by the credit reporting agencies. If you end up registering too many queries in a short while, it can affect your credit score negatively.

Note that some lenders may offer a car loan pre-approval without a credit check, especially if you apply online. Unfortunately, this doesn’t accurately present your financial situation and, as a result, the pre-approved loan amount can differ significantly from the sum that’s finally approved.

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Learn more about car loans

How to apply for pre-approval of a car loan from RACV?

If you’re planning to apply for a car loan with RACV, the best way to start is by having a clear picture of your requirements. By getting pre-approval on your car loan, you’ll be able to go shopping for your new car with a definite budget that will help you narrow your search. Once you’ve decided to buy a car with the help of a loan, you may have even identified the type of car you would like to purchase, you can seek pre-approval on a car loan from RACV. 

You can apply for pre-approval by filling out a form online and uploading the relevant documentation regarding your identification, income, debt and credit history. Once you submit your application, RACV will review and verify the documents. If you meet their eligibility criteria, you will get pre-approval for the amount they are willing to lend to you. With this pre-approval, you can go car shopping with the confidence of knowing what you can afford.

How to get pre-approved for a credit union car loan?

Getting pre-approval for a credit union car loan can make the process and paperwork required to buy a car more streamlined and less stressful. You can apply for pre-approval for a credit union car loan, online or contact your credit union. You’ll be asked to provide relevant documentation regarding your income. After you submit your application, your credit union will review and evaluate it along with the documents you submitted. If you meet the eligibility criteria, your loan will be pre-approved for a specific amount.

With pre-approval for a credit union car loan in hand, you can negotiate your new car’s price with peace of mind you have the funds.

How to get pre-approval for your ANZ car loan?

Getting pre-approval on your car loan can give you a good idea of how much you may be allowed to borrow. This will help you set your limits while selecting your car. You can apply for pre-approval for an ANZ car loan by filling out a simple online application form, where you’ll have to submit relevant identity, employment and income documentation. 

ANZ will then conduct a credit check based on your application and documentation. It’s important to note that this could have an impact on your credit history. Based on your credit and income documentation analysis, ANZ will provide an amount they are willing to give you as a loan. After this, you can find the right car that matches the proposed loan amount and send it through your final loan application. 

It’s important to remember that pre-approval gives you an indication of how much you can borrow from ANZ to purchase your car, but it doesn’t guarantee the final approval. 

How to get pre-approval for a car loan from Westpac?

You can easily apply for pre-approval on your Westpac car loan over the phone, in the branch or online. A fast way to apply for pre-approval is by applying online as the application process only takes around 10-15 minutes to complete.

While filling out the application, you’ll need to answer specific questions about your financial situation, like your income, assets, debts, and expenses. You’ll also have to provide supporting documentation, especially if you’re not an existing customer.

Once you’ve submitted the application, and meet the eligibility criteria, Westpac will likely take up to 2 days to provide pre-approval. After you get pre-approval, you’ll know the size of the car loan Westpac is willing to offer you. You’ll then have 30 days to find your new car within the pre-approved amount.

What is a pre-approval?

A pre-approval is a formal document that indicates how much a lender is willing to lend to a consumer – once that person has found the car they want to buy. A lender will assess a borrower’s credit history and financial circumstances before issuing a pre-approval. However, lenders are under no obligation to follow through on pre-approvals, so pre-approvals should be seen as statements of intent rather than rock-solid guarantees.

How do I get car loan approval from Bankwest?

Bankwest offers loans for cars that are less than seven years old or have a minimum value of $10,000. Loan terms are between three and seven years  at a fixed interest rate, with the option to make extra payments without any extra charges.

To apply for Bankwest car loan pre-approval, you’ll need proof of your identity and income. You’ll also need other documentation, such as insurance certificates and registration papers. 

Once you receive conditional approval and have selected your car, you may have to provide supporting documents to proceed to the next stage.

Where can I get a student car loan?

Student car loans are not a necessarily a product in and of themselves, but what you may be looking for is a guarantor car loan.

A guarantor car loan has a third-party act as a form of guarantee for your loan application, telling the bank or lender that if you default on your loan, someone will pay the loan repayments.

Going guarantor on a car loan is no new thing, and before internet-based credit scores, guarantor car loan applicants would apply for loans with a guarantor or property owner who could vouch for the person borrowing the loan.

To get a guarantor car loan, you’ll need someone willing to act as a guarantor for your car loan.

What is a secured car loan?

A secured car loan is a loan that is connected to a form of security, or collateral. Generally, the security for a car loan is the car itself. If you fail to repay the loan, the lender might seize your car, sell it and then use the proceeds to recover their debt.

How do you get a car loan?

There are four different ways you can get a car loan. You can go straight to a lender. You can get a finance broker to organise a car loan for you. You can get ‘dealer finance’ – which is when the car dealer organises a car loan for you. Or you can organise your own car loan through a comparison website, like RateCity.

Whichever method you choose, you will need to provide proof of identification, proof of income and proof of savings. So you may be asked for any combination of passport, driver’s licence, bank statements, payslips, tax returns and utility bills. You might also be asked to provide proof of insurance.

What is a guarantor car loan?

A guarantor car loan is a type of loan that features a guarantor on the agreement. The guarantor is a third-party individual, often a friend or relative, who guarantees the loan will be repaid if the borrower defaults on the car loan.

Guarantor car loans are often geared at people who might otherwise struggle being accepted for a secured car loan when purchasing a vehicle. Some of the reasons might include a lack of credit history such as with a student or young person, if there’s bad credit, or age as a factor such as with pensioners.

How to find a great car loan

Historically, finding a great car loan would require excess research ranging from visiting an excess of websites or making phone calls, but technology has moved on. Using RateCity, Australia’s leading financial comparison service, you can check out great deals from a range of lenders on the one site.

To start, select the amount you want to borrow and the length of the loan, narrowing your search to show just fixed or variable interest rate results.

Once you’ve indicated your search criteria, you’ll see an immediate list of lenders, ranked by interest rate or application fees. You’ll also be able to view the monthly repayment amount for each result, helping you to know what you can afford.

Up to six products can be compared side-by-side, complete with more information about each car loan, giving you more information about your options.

When comparing your car loan options, it’s ideal to keep in mind some points find a great car loan for your needs. Consider the following:

  • Choosing a low interest car loan can reduce costs
  • Selecting an option with low fees and charges is ideal, because these can really add up
  • Be aware of penalties, such as early exit penalties if you pay off the loan sooner than expected
  • Consider the features that best suit your situation

There are many ways to ensure that you get a great car loan. Ultimately, you’ll end up with the best deal by doing your research and selecting the most suitable product for you.

What is a guarantor on a car loan?

A guarantor on a car loan is a third party, usually a relative or friend, who guarantees to meet the repayments of a loan for the purchase of a car, if the borrower/owner of the car defaults on the loan.

Guarantor car loans can be useful for people who would otherwise struggle in being accepted for credit to purchase a vehicle. These may include people with bad credit, students and young people who may have no credit history, as well as some pensioners.

Many lenders offer guarantor car loans, guarantor personal loans and guarantor home loans, because of the significantly reduced risk to the lender.

Can I get a discounted student car loan?

Being a student is tough enough, and while you might find the odd student discount on movies and technology, the same can’t be said about car loans, as you can’t really get a discounted student car loan.

Lenders make money on the interest and fees that they charge with loans, and the lowest interest and fees are given to the most reliable credit holders: people with excellent credit history.

As a student, you are unlikely to have enough on your credit report to warrant an excellent history. There are however, ways of getting a lower interest car loan if you can’t get an interest-free loan from the bank of mum and dad. One way of doing this may be through getting a guarantor car loan, which can get you a secured car loan by setting your parents up as guarantors.

Can I get a car loan with poor credit?

Poor credit doesn’t necessarily mean you won’t be able to get finance for your car purchase, though your options aren’t likely to be the same as someone with good credit.

In fact, a number of specialist lenders exist offering car finance for customers with poor credit, able to provide access to bad credit car loans.

However having a history of poor credit will likely mark you as a potential risk to lenders, so your car financing needs could see higher fees and interest rates. Alternatively, consider a secured car loan, which is a type of loan that uses the car you purchase as collateral, reducing the risk.

Other options include getting someone close to act as a guarantor for your car loan, or to talk to a broker about a personalised rate specific to your circumstances.