How Do You Compare Car Loans?

J. Richards

April 12, 2022

Car loans aren’t exactly products on supermarket shelves so how do you actually compare car loans?

ALSO, they are all tailored to a borrower’s circumstances and the vehicle they’re looking at buying – this makes it even more tough to compare.

AND, when you formally apply for a car loan, it can affect your credit report and credit score.

This means:

  • You can’t accurately compare car loans unless they’re tailored to your circumstances
  • Tailoring car loans to your circumstances can mean formally applying
  • Formally applying can affect your credit score
A common trap

Some people fall into the trap of applying to a few different lenders (eg. banks) to select the lowest interest rate, then going back to the lender with that lowest interest rate, only to find they don’t qualify anymore.

Each time you formally apply for credit (like a car loan), it’s recorded on your credit report.

For example, a car loan applicant applies at Bank A, Bank B and Bank C and, before signing any contracts, finds that Bank B offers the lowest interest rate.

However, when the applicant applied to Bank C, their credit score dropped significantly due to the application (enquiry).

Upon returning to Bank B to get the chosen lowest interest rate, the applicant finds they no longer qualify for the loan product with that rate, defeating the whole exercise of applying to different banks in the first place.

Note that the more credit applications someone makes, the more likely their credit score is to drop – this is especially true when applying to multiple lenders in a short period of time.

Why are credit reports so important?

documents to compare car loans

When lender assessment teams check an applicant’s circumstances to see if they qualify for a loan or not, and if they do, what kind of rates and conditions apply, they need a snapshot of the applicant’s financial situation.

Imagine trying to assess thousands of different loan applications when you don’t know anything about the person applying. You’d want clearly listed details of each applicant’s situation to make the assessment faster and more accurate – that’s what a credit report does.

Credit reports summarise and whole bunch of information needed to assess a loan application.

Credit reports in brief

  • Generated when someone over 18 first applies for credit (eg. a phone plan)
  • Contains some personal information like name and address
  • Contains a record of current and past loans, repayment history and enquiries
  • Contains a credit score which ranks a person’s ability to repay a loan (the higher, the better)
  • You can get your credit report from a reporting agency
To compare car loans, look beyond the interest rate

solution

Some people only look at the interest rate, thinking the lowest one is best but it’s more complicated.

Different lenders and loan products have different conditions, for example:

  • Early repayment fees
  • Loan terms (length of time you have to pay off the loan)
  • Set up fees
  • Different factors taken to assess the application (eg. whether you’re a property owner, your income and other assets)

A system that takes your circumstances into account and uses a team of experts to compare car loans behind the scenes to match you to the best loan product from multiple lenders would be ideal.

This would mean only applying for a car loan that matches your situation, selected from dozens of lenders and loan products, saving time and money.

OnlineLoans offers a solution to compare car loans 

The system that OnlineLoans offers has all of the above, making things easy and fast for car loan applicants.

Best of all, OnlineLoans is, as our name suggests, is all online, meaning you can complete your car loan from your device, anytime and anywhere.

Using our advanced, custom built software and online processes backed by our experienced team, your loan application is carefully compared and analysed to match you to the perfect loan product.

This helps avoid too many enquiries to a credit report, cuts out any guess work, saves time and, ultimately, saves money as you won’t wind up with the wrong loan conditions.

Get started with a quick quote and discover why so many Australians choose OnlineLoans.

Not ready?

Try our loan calculator. This tool allows you to play around with the number without submitting any of your information.

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