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The No Deposit Car Loan And How To Go About The Process

the no deposit car loan and how to go about the process (1)

You may have thought to yourself a number of times that it’s time to get yourself a new set of wheels but you don’t have enough money in your account for a loan deposit. As much as having a deposit can help you reduce the amount you need for purchasing the car of your dreams, it can be difficult to get that money especially if you need the car as soon as possible. The good news is that you can actually get a car loan without a deposit. A no deposit car loan can bring you a step closer to owning your own vehicle. There are many lenders that offer no deposit car loans to Australian buyers, you just have to do your research. With that being said, let us dive into more details on how this works.

How Does A No Deposit Car Loan Work?

A no deposit car loan is a type of secured personal loan that provides the financing you need to buy either a used or new vehicle. Remember that a secured loan is the kind of loan where the vehicle you purchased using the loan acts as collateral/security for the loan. When purchasing a car, you have the option of either financing the full amount or placing a deposit. As much as there are some lenders who are willing to give you a loan without a deposit, there are those who require it to settle the loan. When it comes to this kind of loan, there is something known as Loan-To-Value ratio (LVR). This is the amount you need to borrow to buy a particular asset. It’s the maximum percentage of the car’s value that the lender is willing to let you borrow. Before agreeing to lend you money to buy a car, the lender will calculate the LVR figure for your desired loan amount by dividing the loan amount by the value of the car. The lower the LVR the better as it carries less risk. So if the LVR figure is within the lender’s guidelines, you may be approved for financing.

What Factors Affect Your Ability To Get This Loan?

It’s important to note that not everyone is eligible for this kind of loan. A lender must be sure that if they offer you this loan, there won’t be any unexpected risk attached to it. There are a number of factors that can affect your eligibility. Firstly, if you don’t have any credit history, that could be seen as a red flag. If you can’t show a history of borrowing money and making timely repayments to pay off your debt, then you might be seen as a risk hence you will be required to pay a deposit. Secondly, you have a bad credit history. Such borrowers are seen as a higher risk to lenders and you may need to have a deposit saved up. Thirdly, if the sale price exceeds its book value. If this is the case, you may need a deposit to ensure that your loan amount falls within the lender’s LVR guidelines.

What You Will Need Before Applying

There are a number of things that are required from you and it’s important that you meet the criteria for your application to be approved. You need to be over 18 years, a resident of Australia, have a good credit history and have a steady source of income. During the application process you will need your I.D, details of your employment and income, information about any outstanding loans and details of the vehicle you wish to purchase.

How to compare no deposit car loans

When comparing, be on the lookout for things like the loan amount. Since you are not paying a deposit, the amount you are borrowing will increase, so make sure you will be able to afford to pay off your debt. Secondly, interest rates. As you may know, interest rates play a huge role on the total cost of your loan. Finding the lowest interest rates will for sure save you thousands of dollars over the lifespan of your loan so shop around for competitive rates. Thirdly, repayment schedule and flexibility. Question how often you will need to make a repayment and what will the regular amount be. Also inquire with your lender if it’s possible to make an additional repayment and whether it will incur an extra fee. Last but not least, read through the terms and conditions. The last thing you want is to be caught off guard with extra fees and charges. 

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