If you are interested in financing a new vehicle, you should have a good foundation of how to get a car loan. The first thing credit providers consider when evaluating your car loan application is your credit score. If you have no idea how your credit score stands, we can help.

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Your credit score essentially reflects how reliable you are as a borrower. The higher your credit score, the more likely you may get approved for a car loan.

GetCreditScore uses Equifax, a leading credit bureau that calculates your credit score based on the information in your credit report, which is a comprehensive document that outlines your credit history. If you have ever applied for credit, you are entitled to request a copy of your credit report. So sign up now and let us handle the job for you!

What credit score do you need for a car loan?

There is no magic number that guarantees approval on how to get a car loan, but your credit score and potential interest rate are often inversely related. That means you may find yourself being offered lower interest rates if you have a high credit score. However, that does not mean you need perfect credit to take out a car loan. There are alternative lenders who can accommodate bad credit car loans if you can handle the interest rates.

Equifax rates credit scores on a scale and classifies consumers into the following classifications (these score ranges are estimates since they are subject to change):

Excellent (≈853–1,200). This rating range represents the pinnacle of credit scores. The people in this group are some of the most influential consumers in Australia. They are considered to be very unlikely to experience an adverse financial event – such as a default or bankruptcy – over the next year. If your credit score is in this range, credit providers would be glad to offer you favourable terms when it comes to a personal loan for a car or any other type of loan.
Very Good (≈735–852). Those with credit scores in this range are more likely to maintain a positive credit report over the next year than the average consumer. Therefore, if you fall into this category, you should have no trouble taking out a bank loan for a car with reasonable terms.
Good (≈661–734). The people in this cluster are also more likely to keep a clear credit report over the next year than the average consumer. They maintain a healthy rating that suggests a fairly low probability of a major financial setback. If you have a good credit score, you can quickly move up a classification by minimising your credit applications and paying your credit obligations on time.
Average (≈460–660). Those who have credit scores in this range are considered to be  likely to experience an adverse financial event over the next year. However, they can easily improve their credit rating if they tighten up their credit behaviour.
Below Average (≈0–459). The individuals who have credit scores in this range are most likely to experience an adverse financial event over the next year. Their reports usually contain successive negative data that caused their rating to decline sharply. If your credit score is in this range, you should work on clearing defaults and paying your bills on time.

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How much money can I borrow from a car loan?

The amount you can borrow from a car loan is based on your income, expenses, and credit habits. It also depends on what type of car loan you take out: secured or unsecured.

Many traditional credit providers in Australia provide secured car loans between $10,000 and $100,000. As part of its car loan requirement, the car must be purchased as security, giving you lower interest rates than unsecured loans. However, that also means that the creditor can repossess the vehicle to recoup the cost in the unlikely event that you cannot pay back the loan.

Many credit providers have calculators on their websites to help you get an estimate of how much you can borrow when applying for car finance. You can also use these calculators to get an estimate of how much you may incur in weekly, fortnightly, or monthly repayments.

How to get a car loan?

You should prepare all the necessary documents before you start approaching credit providers about how to get a car loan. These include valid identification, vehicle details, proof of income, and your other assets and liabilities. You can then proceed with the loan application process, which usually involves filling out forms, submitting the required documents, and signing an agreement upon approval.
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Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.