How Much Car Loan Do You Qualify For?
Tuesday, 21 December 2021
Buying a car goes beyond understanding car trims, car loan terms, and loan conditions. It requires you to evaluate your finances before getting a car loan in New Zealand. Just because you have a fat paycheck, it doesn’t mean you should blindly take out a vehicle loan.
You’ll probably find it difficult to manage consistent large payments and costly extras that come with some cars. Such scenarios happen when you don’t know the best loan amount to go for. Remember, there’s a vast difference between what you want to pay and what you can afford.
Take time to figure out how much of a loan amount you can manage to pay before determining the vehicle to buy. Let’s help you understand this concept better below.
Understanding Your Borrowing Power
Despite ‘how much can I borrow for my car’ being a frequent question asked online and offline by potential car loan borrowers, many still can’t see the importance of understanding the car loan borrowing power. Establishing your borrowing limits in advance will help you:
Protect Your Credit Score
When you determine your loan affordability, you focus on sending applications within your budget. That reduces the chances of receiving declined financial inquiries that can damage your credit history. Many lenders want to deal with borrowers that have proven creditworthiness. You can find more here of how to measure credit score and some handy tips.
Every auto loan request you submit will reflect on your credit file detailing the number of applications made and the relevant outcomes. The results will show on your report, ruin your credit score, and portray you as a red flag to lenders. If you make many unrealistic financial applications due to a lack of knowledge of your lending power, you’ll get frustrated.
Determine How Much You Can Afford to Borrow
Don’t wait to be slapped with a report that questions your borrowing capacity. If that happens, it implies that you don’t demonstrate the ability to accommodate the car loan expenses on top of your other existing monthly expenses. It also shows that the amount you’re borrowing is too high for your financial status
So, how do you know how much you can afford to take as your car loan? Here are the guiding rules for the first time or subsequent new and used car loan borrowers:
- When applying for an NZ vehicle loan, ensure your payments take 10% or less of your net income.
- Be cautious on extra expenses. Your payments should not exceed 20% of your vehicle overall expenses.
- Determine how much you can afford to pay for each month, and you’ll quickly establish the amount you’re comfortable paying.
- Check out the Kiwi Car Loans online calculator to know repayment rates and how much you can borrow.
How to Work It Out
Always look beyond your car-related expenses. Consider other expenditures and payments you’ll have to incur. The general principle is to ensure your monthly take-home pay is double your expenses regardless of how manageable your choice of car loan interest in NZ may seem.
Going against this rule of thumb will put you in a precarious situation that can easily lead to serious financial problems. Your goal should be taking out a car loan you can afford to pay back. It feels good when you can constantly pay a Kiwi car loan without altering your other budgets.
Get Kiwi Car Loan Experts’ Help
Are you having difficulties establishing how much car loan you qualify for in NZ? Don’t walk this path alone. Kiwi Car Loan Experts will help you understand your car loan’s healthy limits. Looking at your income, monthly expenditures, financial history, and other debts (if any) will enable us to offer the most accurate feedback. Call us at 0800 008 888 today!