What can influence the wait for car loan approval
A range of factors can slow down or speed up your car loan approval as we explain in this guide
The steps in a car loan application and what slows it down
Step 1 – Application and eligibility
The first step in any car loan application is to apply. This requires an applicant to submit basic details about themselves such as name, address, phone number, email address, and other contact information.
At this step, the lender may ask some pre-qualification questions to determine a borrower’s eligibility. This may ask if the borrower is an Australian citizen or resident, over the age of 18, if they are employed, and estimates of income and expenditure. If the applicant has satisfied these requirements, they must consent to a formal credit check.
The delay occurs if the applicant takes more time to complete the online form.
Step 2 – Formal credit check
This part of the application allows a lender to make a formal credit inquiry into the borrower to determine their creditworthiness. In most cases, government ID is required to proceed – a drivers’ licence, passport, etc. Credit checks, when conducted online are instant. This part of the process can be slowed down by an applicant taking more time to submit their ID.
At this stage, the applicant may be conditionally approved for a selection of loans. For other customers, they may need to submit further documentation.
Step 3 – Documentation and supporting evidence
At this stage, your lender may insist on additional documentation or checking to verify your financial situation. If you pass the first eligibility criteria, lenders will need to conduct further checks on your residential history, employment history, and so on. Bad credit customers may experience delays as lenders double check with employers, landlords, to ensure your information is correct.
Step 4 – Settlement
Some lenders may transfer the money into your bank account which you then pass on to the dealer.
What’s more common is the car dealer will send transfer documentation to your lender to complete the purchase.
In this case, the dealer will release your car for pick-up once the loan is settled or they gain confirmation that the funds transfer is in progress.
Other common delays in car loan applications
Some lenders may have cut-off times for processing. They may guarantee a quick turnaround time, depending on a few factors. You may have to apply in the morning or before a certain time (2 pm for example) to ensure the lender has time to process your application – provided you don’t need to supply additional documentation.
The other common delay in car loan approvals is being slow to provide information on the car you want to buy. This is needed especially in used or vintage car buying scenarios when an independent or manual valuation is required to determine the risk involved with financing the vehicle (which influences your approval or interest rate.)