Whether you’re upgrading your family car, replacing an older vehicle, or gearing up to purchase your very first set of wheels, you may consider a car loan to help cover the upfront costs. But the question is: How much can I borrow for a car loan?
The answer isn’t the same for everyone. The amount you may be able to borrow depends on a range of factors, including your income, expenses, credit history and the lender’s credit eligibility criteria.
At Rapid Loans, eligible borrowers can apply for secured vehicle loans from $5,000 to $45,000, subject to approval. Understanding what lenders look at before you apply can help you set a realistic budget and prepare your application.
This article explains how car-loan borrowing capacity works, what lenders consider, and how you can prepare before applying.
Start by understanding your budget
Before you start comparing vehicles, it’s worth taking a step back and working out what you can comfortably afford.
While the purchase price is important, owning a car comes with ongoing costs that are easy to overlook, including:
- Registration
- Comprehensive insurance
- Fuel or charging costs
- Servicing and maintenance
- Roadside assistance
- Tyres and repairs
Factoring in these expenses can give you a clearer picture of what you can comfortably afford.
At Rapid Loans, our secured vehicle loan products are available from $5,000 to $45,000, with loan terms ranging from 24 to 60 months, subject to our credit eligibility criteria and approval.
What do lenders look at?
Each lender has its own lending criteria, but they’ll generally assess several factors before deciding how much you may be able to borrow. These often include:
- Your income
- Your regular living expenses
- Existing loans or credit commitments
- Employment history
- Your credit history
- The value and eligibility of the vehicle being purchased
Preparing your car loan application
Taking some time to prepare before applying can make the process smoother. A few useful steps include:
Checking your credit report
Your credit report provides information about your borrowing history and can help identify any errors that should be corrected before you apply. You can access your credit report through Australian credit reporting agencies such as Equifax or Experian.
Work out a comfortable budget
Rather than borrowing the maximum amount available, think about what repayment amount fits comfortably within your existing budget.
Sometimes choosing a slightly more affordable vehicle can reduce financial pressure over the life of the loan.
Gather your documents
Having your documents ready before you apply can save time later.
Depending on your circumstances, you may be asked to provide:
- Identification
- Payslips
- Bank statements
- Proof of address
- Details about the vehicle you’re purchasing
Does your credit score affect how much you can borrow?
Your credit history is one of several factors lenders may consider when assessing your application. Depending on the lender, it may influence the loan amount, loan features or interest rate available.
Generally, a stronger credit history may improve your borrowing options, while a lower credit score may affect the amount you’re able to borrow or the loan features available.
If your credit score is lower than expected, here are our tips for applying for a car loan with below average credit. A lower or average credit score doesn’t necessarily mean your application won’t be approved, although it may affect the loan amount, loan features or interest rate available.
Lenders also consider your income, current financial commitments and overall ability to manage repayments. Every application is assessed individually against the lender’s credit eligibility criteria.
How do lenders calculate borrowing capacity?
Lenders determine your borrowing power by conducting a credit check to help assess whether you’re eligible for a loan. Factors such as your income, employment status, savings, expenses, and credit history collectively shape the lender’s assessment.
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 information helps the lender assess your application against its lending criteria and determine whether you meet its eligibility requirements. It’s important to note that a formal credit enquiry may be recorded on your credit file. However, this forms part of the lender’s assessment process.
Making sure you have everything in order before applying for a loan is a good idea. Having your documents ready before you apply may help avoid delays during the assessment process. If you have questions about anything before you get started, you can always contact our customer service team and we can answer your questions about our loan products and application process.
Looking beyond the advertised interest rate
When comparing car loans, it’s natural to focus on the interest rate—but it shouldn’t be the only thing you consider.
It’s also worth considering 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. Understanding the expected repayments can help when planning your budget 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.Some borrowers choose to make additional repayments or repay their loan early to reduce the loan balance or total interest payable. Some lenders will charge early repayment fees, but Rapid Loans allows eligible borrowers to make additional repayments or repay their loan early without additional early-repayment costs.
Rapid Loans secured vehicle loans Rapid Loans offers secured vehicle loans from $5,000 to $45,000, subject to lending criteria and approval. If you’re considering applying for a loan before purchasing a vehicle, Rapid Loans offers pre-approval, which provides an indication of the amount you may be able to borrow, subject to final approval and the vehicle meeting our lending requirements. If you’d like to learn more about our vehicle loan products or the application process, contact our team or apply online.
This article is general information only and does not constitute financial or credit advice. It does not take into account your personal objectives, financial situation or needs. When you apply for a loan with Rapid Loans, your application will be assessed against our credit eligibility criteria. All applications are subject to approval. Terms and conditions, fees and charges apply.