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Are you a temporary resident living in Australia? If you want to see all of this beautiful country by car, but don’t have enough cash to buy one, a car loan might help you.
Getting a car loan on a temporary resident visa can be tricky, but it’s not impossible. Depending on your income, visa status and employment, you could be eligible for a car loan to get you on the road.
What types of car loans are available to temporary residents
Car loans for temporary residents are essentially the same as car loans for permanent residents, but with stricter lending criteria.
Before you start your loan application process, it’s a good idea to review the type of car loan that best suits you. Temporary residents, if eligible, can choose between a secured or unsecured car loan with either a fixed or variable interest rate.
Secured: Temporary residents are usually offered secured car loans, as these provide a higher level of security to the lender. Secured loans use the car being bought as collateral on the loan. This means that if the borrower defaults on their loan repayments, the lender can repossess the vehicle to cover their losses.
Unsecured: It is rare to find a credit provider that will provide an unsecured loan to a temporary resident. This is because an unsecured car loan represents a higher risk to the lender. If, however, you have been living in Australia for several years, own your own home and have a high income, some lenders might grant you an unsecured loan.
Fixed Rate: Fixed rate car loans have a set interest rate that does not change over the length of the loan. Non-resident loans often have short loan terms, so fixed rates make it easier for the lender to calculate interest costs, and also easier for the borrower to budget for repayments.
Variable Rate: Variable rate car loans can be available to non-residents, but this is not as common as with fixed rate loans. The interest rate charged might vary over the loan term. However, as temporary resident car loans often have short terms, this may not be the case.
What are the lending criteria for temporary residents in Australia?
Car loans for temporary residents represent a higher risk to the lender as you are in Australia temporarily. Even if you plan to stay for the long haul, the legal uncertainty of your residency can impact upon your car loan application.
The higher risk means to lenders mean they apply stricter lending criteria compared to car loans for permanent residents. These criteria can vary from lender to lender, and are worth noting before you decide which car loan is best for you. Essentially, you need to prove you are a trustworthy and credible borrower.
Eligibility criteria will vary between lenders, but on the whole they will look at your:
Income Stream: Many lenders will require you to earn at least $50,000 per year, from a regular income stream.
Australian Credit Rating: When applying for a loan, lenders will look at your credit rating in Australia only; overseas credit ratings will not be considered.
Visa Length: Before you apply for a car loan, consider how long you have left on your visa. Car loan terms will usually be a minimum of two years, so if you have less than one year left on your visa, you probably will not qualify for a temporary resident car loan.
Visa Type: If you’re on a student or working visa with a path to permanent residency, this could positively impact upon your application. However, if you are on a holiday or bridging visa with no expiry date, this could negatively impact on your application. If you’re unsure of your visa type, you can check your status on VEVO.
Can you get a temporary resident car loan with bad credit?
The good news is that if you have a bad credit rating overseas, Australian lenders will not consider this in assessing your loan eligibility. This means that if you have a good credit score in Australia, you may still be eligible for the loan.
However, if you have a bad credit rating in Australia, it will be more difficult for you to get approval for a car loan. Paying bills on time via direct debit or making monthly rental payments can help improve your credit rating and should be considered before applying for a car loan.
Remember that applying for multiple loans in a short amount of time or getting a negative credit rating will damage your overall credit score. This could affect your ability to get the car loan you desire. Applying for more money than you need is usually not a good idea either, as a higher amount will mean higher repayments and potentially higher interest and you may get knocked back if you can’t afford the repayments.
Can you get a car loan on a 457 or 482 Visa?
As of March 2018, the temporary work visa (457) was replaced with the temporary skill shortage visa (482). All temporary residents, regardless of whether you are on a 457 or 482 visa, will have their car loan applications assessed on their ability to repay the debt in the time they are expected to stay in Australia.
Is the process the same?
The process of applying for a car loan on a 457 or 482 visa is similar. While each lender has their own criteria, temporary residents will need to supply more documentation to prove their eligibility, and affordability tests are more stringent.
Who is eligible?
Temporary Skill Shortage (TSS) visa holders who have been working in Australia with the same employer for three years may be eligible to apply for Permanent Residency through the Transitional (TRT) Stream. This path to permanent residency for temporary residents on a 482 visa may improve their chance of securing a car loan, however, it depends entirely upon the lender and their eligibility criteria.
How to increase your chance of car loan approval
A non-resident's ability to get a car loan will depend upon the lender’s criteria, their visa and financial situation. However, there are a few things non-residents can do to improve their chances of getting a car loan before beginning the application process.
Check visa expiry dates: Applying for a car loan when you have enough time left on your visa to account for a two to five-year loan term may improve your chances of approval. This is because the loan term for temporary residents always ends at least three months before your visa ends.
Proof of Australian residence: If you can prove that you are renting, or even own an Australian residence, you may have a greater chance of receiving approval on a car loan. Paying monthly rent and expenses from a savings account and providing bank statements to the lender is a great way to prove that you can meet loan repayments.
Do not breach your visa requirements: Working visas often come with certain requirements, such as restricting working hours and choice of employers. Many non-residents can only work with one employer, for a certain number of hours per week. If you breach your visa by either working more hours than stipulated or having multiple jobs, you may not be denied a car loan.
Save a cash deposit: Cash savings put borrowers in good stead when applying for car loans, especially when a deposit is needed and you must prove you earned it. If you can prove that these savings have been held in an Australian bank account, as a result of receiving regular, stable income, this will put you in a better position to get your car loan approved.
Prove regular, stable income: If you receive a steady income in an Australian bank account, you may increase your chance of loan approval. Many lenders look for income earners over $50,000 per year, who earn regular income throughout the year. Seasonal income, regardless of whether it amounts to a larger amount, is often viewed less favourably than continuous, regular income.
Case Study: Lee and Anna apply for a car loan
Say for instance Lee is a temporary resident from Canada, and he is on a 457 visa that expires in six months.
His friend, Anna, is also a temporary resident from Canada, but she is on the 482 TSS visa that expires in four years. Lee will need a lender to agree to a car loan term of three months, which is highly unlikely.
If Anna can prove she is a reliable candidate, she has a greater chance of approval as the lender can offer her a loan term of up to three years and nine months.
How to compare temporary resident car loans
Before you decide which car loan is best for you, it’s important to compare the different car loans available on the following features:
Loan term: The loan term on a temporary resident car loan is usually restricted to ending no less than three months before the expiry date on your visa. As loan terms are often around two to three years, it can add up to high monthly repayments. Make sure you calculate your car loan repayments to ensure you can afford them.
Hidden fees: After you have reviewed the repayment amounts, you need to dig a little deeper into each car loan you consider. Many fees for car loans - including application fees and ongoing monthly or annual fees - are hidden. Make sure you read the Product Disclosure Statement (PDS) and any other documents before you agree to a car loan.
Flexibility: Another key feature to look at when comparing car loans for temporary residents is their flexibility. If you manage to secure extra funds, potentially as a gift or at tax time, you may want to pay off your car loan quicker than agreed. Some lenders charge early exit fees when borrowers repay their loan early, to recoup the interest you would have paid if you made repayments over the agreed loan term. Before you sign anything, make sure you read the fine print and check if you will be charged any fees for early exit or extra repayments.
Lender reviews and reputation: Once you compare the fees, term and flexibility of the loan, and you have a few options in mind, the next thing to do is a little online research. Search for consumer reviews about the lender and the specific loan you want to apply for. You can do this by searching for [Loan Name] [Lender Name] Customer Reviews. Look out for third party review sites that are subjective, and not just the reviews the lender shows on their website. If the loan looks too good to be true, it probably is.
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Your credit history is a record of the dealings you’ve had with credit providers such as banks, credit card companies, mobile phone companies and internet companies. Your credit history records how successfully you’ve managed your repayments. It also records how many credit applications you’ve made and how many of those were rejected.
Credit providers refer to your credit history when deciding whether or not to extend you credit. Missing repayments is a bad sign; making too many applications or having applications rejected can also be a bad sign.
Credit infringements can remain on your credit history for five years – or seven years for serious infringements.
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.
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.
There’s no set number. That’s because borrowing capacity differs from person to person, as well as lender to lender.
Lenders don’t give out car loans unless they’re confident they’ll be repaid. Each person is different, so the amount of money one person can successfully borrow will differ from another person’s number. Also, each lender uses its own formulas to calculate borrowing capacity – so Mr & Mrs Smith might find that while Lender X will give them a car loan for $20,000, Lender Y will offer only $18,000.
A car loan, also known as vehicle finance, is money that a consumer borrows with the express purpose of buying a vehicle, such as a car, motorbike, van, truck or campervan. Car loans can be used for both new and used vehicles.
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.
A car loan calculator is an online tool that helps consumers understand how much they would have to repay under different scenarios. Consumers can create these different scenarios by entering different borrowing amounts, interest rates, loan terms and repayment schedules into the car loan calculator.
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