October 7, 2021
You asked, we answered.
How Much Can I Borrow?
In short: It depends on your circumstances.
But there are some things to consider
We go over the facts to figure out the answer to the big question: how much can I borrow? As we’ll find out, a lot goes into calculating loan amounts.
Calculations are bespoke per applicant as everyone’s circumstances are different, in other words, it’s case by case.
Equally as important, there’s a lot borrowers can do to maximise their loan amount should they require.
How loan amounts are calculated
A borrower’s loan amount is calculated based on how much they can comfortably afford to pay back.
“Pay back” means the dollar amount per scheduled repayment which are usually weekly, fortnightly or monthly – selected by the borrower.
Repayment amounts can be altered by changing the loan term (time period of the loan).
For example, $20,000 paid back over a 7 year term will attract lower scheduled repayments than $20,000 paid back over a 2 year term.
Typically, the longest car loan terms available are 84 months or 7 years. Make sure to crunch the numbers to ensure a loan is right for you.
Other factors also play a role in calculating loan amounts
We all have living expenses; groceries, utilities, phone bills, transport… It’s a list we all wish was a little shorter.
When calculating loan amounts, lending institutions need to allow borrowers to cover their living costs with enough surplus to make the scheduled loan repayments.
Additional expenses like subscriptions to streaming services, gyms or games that require ongoing payments can limit surplus income.
Different people have different lifestyles. When assessing a loan application, lenders often request an applicant’s bank statements, typically showing 3 months or more of transaction history.
This is to get a snapshot of the applicant’s lifestyle. Do they eat out regularly? Do they spend a lot on alcohol and/or tobacco? Do they gamble a lot?
Or, do they live moderately and save money each pay cycle?
In other words, can the applicant maintain their current lifestyle plus additional loan repayments?
Everyone in Australia over the age of 18 will typically generate a credit report upon the first time they have a bill in their name. This could be a phone plan or even a utility bill.
These reports detail personal information as well as repayment history and credit enquiries.
Also found within a credit report is a credit score. These scores are based on past credit history and often range from 0 to 1,200. The higher they are, the better when you want to borrow money.
Make sure your credit score is as high as it can be.
A high credit score and clean, up-to-date credit history can mean some applicants are able to borrow larger amounts and have an increased chance of approval.
Income / employment
Naturally, the ability to repay a loan is a huge factor in determining how much an applicant can potentially borrow.
Generally, a higher income means the capacity to make larger scheduled repayments (in terms of dollars).
Employment also has a significant impact on loan amounts. Lenders typically prefer applicants with stable, full-time employment.
If you’re new to your job or working part time or casual hours, not to worry. OnlineLoans has access to a huge number of options tailored to different circumstances.
This goes for self-employed people too.
Get your ducks in a row
Many people prepare long in advance prior to applying for a loan.
This can mean a combination of the following;
Keep expenses low.
If possible, try to limit unnecessary expenses or cut down on things you might not need. This can increase any surplus income needed for loan repayments down the track.
Many people avoid taking on additional financial commitments in the lead up to applying for a loan.
Make sure any existing loans and bills are up to date
If you have an old phone bill owing or an existing loan for example, try to make sure they’re all in the black. Remember, these often show up on a credit report which lenders will likely look at.
Some applicants play it safe and pay off any existing loans or look at refinancing.
Talk to your employer
Often, letting your employer know that you’re thinking about taking out a loan can help. If you’re on probation with a new employer, it might be worth waiting until you’re off probation before applying.
Some lenders might ask for an employment confirmation letter too so it can be good to pre-warn them.
The next step
If you’re ready to get into your next car, start with an OnlineLoans quick quote.
You’ll have the ability to consider various options and, upon your selection, get the ball rolling quickly.
OnlineLoans finance covers new, used, dealer and private sale vehicles.
Other Q&A with OnlineLoans that may help
- Can I Get a New Car Loan if I Already Have One?
- Am I eligible for a car loan?
- Secured or Unsecured Car Loans?
- Do I Need a Driver’s Licence to Get a Car Loan?
Stay tuned for more Q&A With OnlineLoans as we clear up car loan confusion.