Car loan application guide

When applying for a car loan, or any other type of finance, it's essential to ensure you have all the relevant information on hand. By providing the necessary information when requested, your car loan application will be processed promptly and smoothly, avoiding unnecessary delays and problems. For joint borrowers this information will generally be required for both (or all) signatories at the time of application.

So what information will you need?

This does vary depending on the specific lender and the chosen loan product. However, in general the required information includes:

Proof of income and employment details

  • copies of each applicant's most recent payslips, or a letter from your employer detailing income details;
  • previous year's tax assessment;
  • employer details for the past three to five years.

Self employed people will also need to provide profit and loss statements and, possibly, tax assessment notices for the previous two years.

Proof of identity

If you are applying for a loan with a lender you already have other financial products with, such as your usual bank or credit union, proof of identity should not be required. However if you are not an existing member of the lender's institution you will be required to provide 100 points of identification.

To provide 100 points of identification you will need to show your lender at least one form of photo ID in addition to a number of other documents with your current address and/or signature, such as recent utility bills, bank statements or Medicare card.

Your lender will be able to provide you with a list of accepted identification, along with the total points allocated to each.

Assets

  • bank accounts;
  • details of shares held;
  • property, motor vehicles and other personal effects owned.

Verification may be required for certain assets such as a rates notice for property owned.

Debts

  • credit cards;
  • mortgage details;
  • verification of other loans held.

Your lender will consider your debt repayment history as well as your credit history overall.

Details of vehicle

Your lender will also need copies of relevant documentation regarding the vehicle you wish to purchase, such as the dealer's invoice, copies of current registration papers and proof of insurance cover. If you are applying for a car loan specifically designed for an environmentally friendly car, proof of its greenhouse emissions may also be required.

What your lender will do

Once supplied with the relevant information, your lender will make their decision regarding the amount of money you will be able to borrow. Their decision will be determined by your ability to make additional repayments for the new loan by taking into account both your existing debt and your total income. They may also consider your 'debt potential' which makes allowances for any available credit you may have which is currently unutilised. An example of this is your credit card credit limit. Although you may only have a credit card debt of $2000, if your credit limit is $10,000 your lender will have to take this extra 'debt potential' of $8000 into account.

Loan insurance

Some lenders will require applicants to take out loan insurance. This covers the applicant (and, consequently, the lender) for times of financial hardship which affect your ability to repay the loan. In general this includes unemployment, times of sickness or injury requiring time off work or death. Premiums are added to the total amount of the loan.

Casual workers, the self employed and people with an imperfect credit history may be required to take out this insurance. Your lender will inform you if this is necessary.

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