Using a company that can approve your loan
In the current age of the Internet it’s very difficult to identify a finance provider or arranger who can actually carry out the service they advertise. Its not difficult to put together an image for an advert that proclaims selling points such as *Approved with bad credit loans *Work visa and beneficiary no problem * We help everyone! Im sure you have seen plenty yourself and all we believe this does is dilute the message from the real companies out there.
CarPow are the real deal and can fully back up our statement to be able to offer Car Loans for bad credit. Why would we waste our time if we couldn’t?
Applying for a car loan with bad credit
This is one of the biggest mysteries when it comes to applying for a finance product such as a used car loan. It is possibly the very top concern of CarPow customers and can cause many people to simply not apply in the first place as let’s face it no one really likes rejection. Often those with bad credit will just not bother applying from past experience with car dealerships or high street banks who only really like those with average to great credit profiles.
Application apathy
We have found from our own customers that they can apply at places who simply don’t have the skills or capabilities to do what they say and it creates a kind of application apathy. Many of our real life customers had unfortune experiences before they applied to us. It could be as simple as applying with their bank for a personal loan for a car and being told it was declined or as embarrassing as visiting a car dealership.
Key takeaway – use an expert loan provider with proven track record and customer reviews.
Face to face decline dilemma
Let’s face it, taking your perfect car on a test drive before sitting at the salesman’s desk eagerly awaiting the approval so you can sign your loan paperwork to only be told you are unable to be accepted is high up there on the ‘ground swallow me up’ life experiences. Getting a car loan with bad credit is certainly less stressful using an online company instead of seeing some one in person.
Key takeaway – let the loan market come to you and use an online provider.
What is involved in a loan application
The online CarPow application form is a start but not ALL of the process as you will see shortly. Unfortunately every month we have hundreds of applicants who start the process but continue no further. Many expect their name and address to be enough to decide the outcome of their case but no it does require a touch more involvement.
Let’s review the key stages of a CarPow Loan:
Application form
- Licence Type
- Age
- Address History
- Employment Status
Affordability Assessment
Credit Check
Licence Type
As a minimum you will require at least a learners licence to be eligible to apply. The type of licence you hold will also effect your ability to get an approval or the rate the lender sets for your loan.
Age
Under 21? Expect it to be hard going as many finance companies will often only consider approval if you are over this age. Don’t be disappointed if you are asked for a co borrower or guarantor as you have little or no history and as much as we would love to change this
we have to stick to the rules.
Address History
Surprisingly this isn’t just used to find out where to send letters too and is also important to assess what is called your stability. Been at your home address for 10 years? This means a lender will have an idea where you will be next year. Had to move every 6 months? Expect
alarm bells to start ringing due to your transient pattern of behavior.
Employment
Working or on the benefit? You might be surprised to hear there are positives to both types of income but mostly a full time employment will give you the greatest chance of success for a car loan. How long you have worked at your current employer is also like your address history – the longer the better. Post COVID its no surprise that essential type work is now considered super safe and looks great when reviewing your application. Higher level professional positions carry an higher salary but that can also mean nothing if we move onto the next factor – affordability.
Affordability assessment
Previously lenders at the top level who dealt with perfect credit customers would approve with one payslip. Those days are starting to disappear and now most will ask for 3 full months bank statements for ALL accounts. Think of a calculation of income minus outgoings and you have a simplified version of what is carried out. A fixed amount is deducted for living expenses and each member of the family has a specific amount used. Rent or mortgage is obviously assessed along with current loans or finance. You need at least $1000 left over ideally for any approval including bad credit car loans.
Responsible lending and financial hardship
The term responsible lending can apply to any type of financial service and the decision making process involved in approval or decline and its certainly relevant when it comes to vehicle loans.
A finance company has certain obligations in regards to allowing a customer to accrue a lability in the form of loan debt. The main focus of this is to ensure they act responsibly in granting car loan approval and carry out a certain level of investigation before doing this. This is why we require 3 full months of bank statements for all parties to a car loan as it literally shows everything being purchased or paid for – for 90 days. A lender will analyse to work out how much is being spent against how much is coming in. If the lender cannot clearly demonstrate that the new car loan wont put the customer into financial hardship – the loan cant be approved.
This usually means that before the new repayments are taken into account a person should have approx. $1000 left over.
Click here for more information from the Commerce Commission on Responsible Lending
Credit check
A final part of the car loan application process is the credit check and popular opinion is that this is the most important aspect. This is not correct. A credit check mostly determines the level of risk involved to the lender as shows what has occurred on previous financial products taken out. If a customer has clearly demonstrated they can afford the loan – a credit check is secondary in the approval process.
This is why those with bad credit can secure a second chance with car loans for bad credit.
Nothing is unworkable apart from existing bankruptcy – as those who are bankrupt are forbidden from taking out new finance. Also very recent car repossessions or loan defaults would need a strong explanation as to why they occurred as it does indicate an applicant is having difficulty with financial hardship.
As we have discovered financial hardship makes approving a new loan facility very hard as should this new loan default once more and is taken to court for recovery of the outstanding balance a judge will ask why it was approved.
The age of your credit file will also play a part in the strength of your application – especially if you are looking for a bad credit car loan. If it has only been active for a short time frame this is ok if you are young but suspicious if not. Questions could be asked about possible name changes or periods living overseas.
