Whether you’re eyeing an upgrade for your family vehicle or gearing up to purchase your very first set of wheels, the idea of applying for a car loan can be both exciting and overwhelming. That’s where Rapid Loans comes in – we offer car loans on new and used vehicles up to $45,000, so we’ve got a finance solution to suit a range of budgets. The burning question on your mind now is likely about how much you can borrow.
The amount you can borrow for a car loan is influenced by various factors, including your current income and the lender’s criteria, which is why we’ve put together this simple guide on all things related to taking out a car loan.
Calculate how much you could borrow now
The first step in your car loan journey is determining your borrowing capacity by looking at your credit history, financial situation and the lender’s policies. Aside from the cost of the vehicle itself, calculating your borrowing power also involves assessing other expenses associated with car ownership, such as insurance, registration, fuel, roadside assistance and more. While fuel and registration are set costs, it’s worth shopping around when it comes to costs like insurance, but also make sure to factor in who will be driving the car and getting the right kind of coverage.
Knowing this information will give you a clear understanding of your financial boundaries and allow you to understand the type of car loan you can afford. By choosing Rapid Loans you could access a secured vehicle loan ranging from $5,000 to $45,000 with flexible repayment terms spanning from 24 to 60 months.
What you’ll need to prepare for a car loan application:
Before diving headfirst into your car loan application with Rapid Loans, we recommend streamlining your process by preparing the following:
- Checking your credit history as it plays an important role in determining your borrowing power. This is also your chance to change any errors or question discrepancies in your credit report so you’ve got a favourable financial profile.
- Establishing a budget to assess your financial capabilities as well as determine the loan amount and repayment term that best aligns with your finances. For example, buying a more affordable car when you only need a bit of extra help funding it may be better than looking for a brand new car where you’ll need to borrow a higher sum.
- Learn how everything works and get all your paperwork together. This list includes things like ID, and proof of income or employment.
What is creditworthiness? Is it tied to my credit score?
Your creditworthiness is closely tied to your credit score and significantly influences the loan amount and interest rate you qualify for. Basically, a higher credit score translates to better loan terms which could potentially save you a substantial amount in interest payments over the duration of the loan.
If you’re not sure what your credit score is, you can contact these credit reporting agencies for your free credit report:
- Experian
- Equifax
If you have a less than desirable credit score, here are our tips for applying for a car loan with below average credit. Keep in mind that an average credit score doesn’t mean you can’t get a loan, it does potentially impact how much borrowing power you have and what kind of terms you’ll be offered. When reviewing loan applications, lenders like us will also have a look at any existing debt you have to ensure your income can cover all your repayments.
How does a lender figure out my borrowing power?
Lenders determine your borrowing power by conducting a credit check to help assess whether you’re eligible for a loan. They’ll also look at your income and expenses to see what’s left over to pay back a loan. Factors such as your income, employment status, savings, expenses and credit score collectively shape your decision-making process.
Before making a formal credit inquiry with a credit reporting agency, you may need to provide payslips, bills in your name and other financial statements to show you can afford to pay back a loan. This allows the lender to do their due diligence and ensure you have capacity to manage your financial obligations. It’s important to note that this process will be recorded on your credit file however is a responsible lending practice that helps make informed borrowing decisions. Making sure you have everything in order before applying for a loan is a good idea. Not only does it make the process faster and easier so if you are successful you can get into looking for a car sooner, but unsuccessful applications can impact your credit score. If you have questions about anything before you get started, you can always contact our friendly team and we can help you get some clarity.
Looking at repayments over interest rates
While low interest rates may seem enticing, it’s important to focus on monthly repayments to get a comprehensive understanding of how much the loan costs each month and how much you’ll be able to budget for. You’ll be able to factor this consistent repayment into your budget month by month alongside the other costs of running a vehicle such as rego, insurance, petrol and other on-road costs.
The other thing to consider is whether there are any fees if you want to make repayments early. Sometimes you might have extra money and want to reduce the overall period of your repayments by putting extra into the balance you owe. Some lenders will charge early repayment fees, but here at Rapid, you’re more than welcome to pay off things early, without any additional costs!
Rapid Loans can assist with car loans
At Rapid Loans, we understand the significance of simplifying the car loan process for our customers. Whether you’re eyeing a brand-new vehicle or a reliable second-hand car, our pre-approval process ensures you’ll have a seamless experience that’s tailored to your financial situation. Having pre-approval also makes things smoother and faster for you to get your next car. Instead of finding a vehicle you want, then applying for a loan before purchasing, you can start your search knowing exactly how much you’re able to borrow.
If you need a loan quickly, look no further than Rapid Loans. We pride ourselves on delivering fast and simple car loans, which means once approved, the funds could be disbursed the same day!
Please note: This is purely an opinion piece and should not be used as a sole source of guidance. This is general advice only, and has not taken into account your financial objectives, needs or requirements. You should seek your own advice to determine if this product is right for you.