Over 90% of vehicles in Australia are currently under finance. Given that most people utilise finance these days for various purchases including buying a vehicle, it’s surprisingly hard to find information about what lenders actually look at on a finance application.
So we’ve created the list below so you can be informed and have the best chance possible of getting your finance application approved by following the guidelines below.
Minimum requirements
As a general rule, you will need to be over 18 years old, provide a minimum of 100 points of identification and be in active employment or in some cases, lenders may also accept certain forms of Centrelink as a primary source of income.
Capacity
Capacity is your ability to afford your current expenses and bills while also supporting the new finance you’re looking to take out.
While some lenders may have different criteria, risk appetites and may be able to apply leniency with some parts of an application, capacity is definitely not one of them.
The Australian Securities & Investments Commission (ASIC) imposes very strict regulations on financiers and brokers to make sure you have the ability to repay any loans you look to take out without suffering hardship and that a loan contract meets your requirements and objectives.
If your application is assessed and the lender determines that you don’t have capacity to support the loan, there is not much that can be done in this situation to change the outcome.
If you have a spouse or de-facto partner that you live with and your application isn’t already submitted in joint names, it may be possible to either add your partner to the application to increase capacity between both applicants or alternatively split expenses such as rent and bills to free up your capacity.
Asset type
Lenders also consider the type of asset you’re financing, including brand, model, purchase price, whether its new or used, private sale or dealership sale. These details can influence the maximum amount that a lender will be willing to lend for the asset as well as the finance term they’re willing to offer.
This is especially true if you’re looking at taking out a secured loan where the asset/vehicle will be used as collateral for the finance.
Employment history
If you are a permanent full-time or part-time employee, you will need to provide your 2 most recent payslips.
If you are currently casually employed, you will also need to provide your 3 most recent payslips and in some cases you may be asked for recent bank statements to prove employment income.
If you are self-employed, you will generally need to provide your most recent tax return.
If you recent any form of Centrelink income, you will need to provide your Income Statement.
The more stable employment history you have, the more favourable your application will look to potential lenders. Unstable employment history can be a red flag for lenders. They tend to prefer permanent employment and continuity of employment (consistent employment within the same field).
Proof of income
Generally payslips will be used to prove employment and as proof of income. In some cases, lenders may also request bank statements.
Assets and liabilities
Lenders will also look at your overall profile and what you own versus what you owe. So they’ll want to know what assets you have and what liabilities, loans, credit cards and bills you currently pay as well. This gives them an overall snapshot of your profile and how much you currently owe.
Living arrangements
As with employment history, lenders also love to see stable living arrangements. This gives them peace of mind that you’re not likely to bug out and stop making your loan repayments. If you can prove stable rental history or that you own (or have a mortgage over a property) it will help your finance application greatly.
Credit profile and history of repayments
Lenders love to see good credit history. This shows them that you pay your bills. If you have previous unpaid defaults or have been bankrupt it can be very difficult to get any kind of finance approval since this says to lenders that you don’t take responsibility for your bills and your finance. If you have unpaid defaults, the best way to help your finance application is to try to pay them out. This shows lenders that you are taking responsibility for your debts and can greatly increase your chances of being approved for finance.
Have questions?
If you have questions or want to talk to someone about your specific circ*mstances, give us a call today on 1800 538 287. Our friendly and knowledgeable Finance Consultants are always available to have a chat with you about your finance needs. Best of all, it’s always obligation-free, so if you don’t want to proceed with finance, you don’t have to.
