Temporary Resident Car Loans in Australia

Temporary Resident Car Loans in Australia

If you’re living and working as a temporary resident in Australia, chances are that you need a way to get around, which means that you need a car. However, getting a loan to buy a car can be complicated, particularly if you are not an Australian citizen or permanent resident. Before you begin, you should learn about the requirements and criteria for temporary residents to take out a vehicle loan.

How do car loans for temporary residents work?

Temporary resident car loans closely resemble ordinary car loans, but they stand out because of their additional stringent criteria for borrowers. The basic structure of the loan will still be the same: the lender issues funds to buy a car, and the borrower makes regular payments with interest until the loan is paid in full.

However, lenders will take a closer look at the borrower’s financial circumstances and at their planned future in Australia. The biggest factor will be the borrower’s visa type and duration, as well as their income, occupation, and existing lines of credit.

What are the criteria for temporary residents to get a car loan?

Car loan lenders are a risk-conscious group, and they consider temporary residents as higher-risk since there is less certainty about their long-term plans. This means that lenders will apply stricter criteria for borrowers.

Visa duration

Most loan terms last from five to seven years, but lenders will not issue loans that go beyond the validity of your current visa. Typically, a temporary resident’s loan term will be scheduled to end at least 90 days before their visa runs out. You should know that lenders will only consider your current visa and not any pending applications or extensions.

Visa category

Not all visas are the same, and certain visa types are more likely to gain the confidence of a lender. The best probability for getting approved comes from employer-backed visas, especially temporary work visas with a path to permanent residency. You can access VEVO to verify your precise visa type.

Visa breaches

Most visas come with strict restrictions on employment eligibility, including the number of jobs held and the number of hours worked. While maximising income is helpful for visa applications, lenders will not do business with anyone who has violated the legal conditions of their visa.

Credit history and finances

While credit history is the most common way of assessing loan eligibility for most loans, this is less applicable in Australia because lenders will typically not consider out-of-country history. As such, the process will resemble a low-doc car loan, meaning a greater focus is put on the applicant’s deposit amount, income, and employment.

What should I consider when picking a car loan?

Every lender and every car loan is different, and not every car loan is a good fit for every applicant. As a temporary resident, there are several things that you must keep in mind when picking out the right car loan for your needs.

Loan security

Most temporary residents are offered secured loans in which the purchased vehicle is used as collateral. Unsecured loans are much less common, but sometimes available for those with a long and stable residential and financial history in Australia.

Loan terms

Since temporary residents may not be planning to stay in Australia very long, their loan terms are usually two to three years instead of the standard five to seven. The loan term will typically end at least 90 days before the current visa expires.

Loan interest rates

Since temporary resident car loans have shorter loan terms, they will also traditionally come with fixed interest rates to make budgeting and planning easier. There are still variable interest rate car loans available, but those are less common.

Loan flexibility

It’s very important to look at lender flexibility for things like early repayments. In the event of needing to abruptly return to your home country, you don’t want to be charged early exit fees when you try to pay off the loan in full ahead of schedule.

Hidden fees

Before submitting a loan application, you should look at the additional fees that each lender is charging on top of the loan interest. These could include initial application fees or recurring account upkeep fees. Always read the Product Disclosure Statement.

Lender reputation

At its core, a car loan is a business contract, and you should be able to trust the people you are in business with. Look at online ratings and focus on independent third-party sites who give impartial reviews. Be wary of offers that seem too good to be true.

How can I boost my chances of car loan approval?

Getting approved for a car loan can be challenging for anyone, but doubly so for applicants without a proven track record of financial dependability inside of Australia. Luckily, there are some straightforward ways to improve your odds of getting approval. 

  • Large deposit: Saving up for a large deposit demonstrates financial responsibility and also reduces the amount that you have to borrow.
  • Steady income: Lenders like to see a stable, reliable income of $50,000 or greater, especially with paycheques deposited into an Australian bank account.
  • Aussie guarantor: If you can have someone else (ideally a citizen or permanent resident) back your loan, that can alleviate the concerns of a prospective lender.
  • Stable residence: Those who rent or own a home in Australia are demonstrating a commitment to sticking around and an ability to make large monthly payments.

How do I apply for a car loan as a temporary resident?

Once you feel confident that you will satisfy lenders’ heightened criteria, you should feel sure with applying for a temporary resident car loan. Below is a general outline of the process.

  • Gather the required documents. These are some of the most common documents that lenders will ask for.
    • Proof of employment
    • Proof of income
    • Bank statement with current savings
    • Document showing your current address
    • Valid visa
    • Credit history in Australia
  • Decide on your loan amount. Evaluate your current budget to see how much you have to borrow and whether you will be able to comfortably make payments each month. Try to ask for as little money as possible.
  • Choose your lender. Compare the competing offers from various lending institutions, focusing on interest rates, loan fees, and flexible options. Remember that you can always ask to negotiate interest rates.
  • Submit the application. Once you’ve determined that you match a lender’s criteria (and that they match your needs), you can submit an application. Try to minimise your application quantity, since each one can ding your credit.

Remember that while online applications are a great resource for many borrowers, they might not always be the right fit for you. In some cases, working in-person with a car loan officer can help you get the benefits of their discretionary power and avoid the impersonal algorithms of an online loan.

Australian Temporary Resident Car Loan FAQ

Can international students get car loans?

Yes, but it will be challenging. Many lenders do not offer loans to international students, and those who do will add additional restrictions and conditions. You may have to consult directly with a loan specialist.

Are there vehicle restrictions for temporary resident car loans?

Secured loans (wherein the vehicle serves as collateral) can have limitations on the vehicle’s age, make, and model. Unsecured loans do not have these limitations, but those are harder to get for temporary residents.

Can I get a bad credit car loan as a temporary resident?

Remember that your credit score in your home country does not transfer to Australia, whether it’s a good score or a poor score. Lenders will focus on your credit history within Australia, and a lower credit rating will definitely make things harder and will result in higher interest rates.

Understanding temporary resident car loans

Applying for car loans as a temporary resident can often bring some extra hurdles and obstacles. Most of these come from the fact that prospective lenders worry that the borrower doesn’t have deep roots in Australia, and there is a possibility that they must abruptly return to their home country.

So when applying for a car loan, your job as a prospective borrower is to demonstrate your long-term commitment to living here and honouring your financial obligations. Now that you know more about the loan process, you can feel more secure that you can get your car loan application approved and get on the road in no time.

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