If you are looking to purchase a new or used car and are hoping to do so with the help of a car loan, there are a number of specific requirements and documents a bank or lender will utilise to determine whether you satisfy car loan eligibility criteria.

Car loan requirements

To be eligible for a car loan, as the borrower, you will be tasked with meeting certain requirements that can vary across loan products as well as across banks and lenders.

As an example, obtaining an unsecured car loan will have stricter criteria for credit scores than a secured car loan, given unsecured car loans possess a lack of security and are of higher risk to the lender. On the other hand, secured car loans where the new or used car is used as security, may have more relaxed requirements.

As a rule of thumb, some general requirements for obtaining a car loan include:

  • Must be 18 years of age or older.
  • Must have a regular source of income.
  • Must be a permanent Australian resident.

In addition, the intended vehicle to be purchased must also meet specific eligibility criteria, which can include:

  • The car must be intended for only personal use.
  • The car must be new or less than 7 years old.
  • The car must be manufactured in Australia or imported by the manufacturer.


Alongside specific requirements, all car loans require a car loan application to aid the bank or lender in assessing both your financial position and the intended vehicle to be purchased. For a smooth car loan application, you will need to provide a range of documents that prove you’re a reliable borrower.

Personal identification and information

Car loan applications require a minimum of 100 points of valid Australian Government forms of identification. These can include can your drivers' license, passport, Medicare card and birth certificate. Car loan applicants will also need to provide personal information such as contact details, address and living situation.

Vehicle details

Car loan applications require the make and model, registration number, engine number and purchase price, as well as whether it's new or pre-owned. Alongside vehicle details, banks or lenders may require a ‘Certificate of Currency’ to inform the bank or lender that the vehicle has been comprehensively insured.

Proof of income

Generally, income is defined by most banks and lenders as money earned through employment or other sources such as rents or investments. To assess your earnings and whether you can meet repayments sufficiently, car loan applications require applicants to provide a minimum of their two most recent pay slips, as well as proof of employment and employer contact information. Those applicants who are self-employed will also be required to provide two years worth of tax returns in addition to the above.

In some cases, applicants searching for a car loan may not be employed and still receive some form of income. For example, retirees may get income from their superannuation or investment accounts. Other types of income could be from government benefits or in some cases disability payments through Centrelink. Ultimately the bank or lender will disclose what they classify as income in order to meet car loan criteria.

Assets and liabilities

To further assess your financial position and ability to meet car loan repayments, car loan applicants are required to provide a comprehensive list of assets and liabilities that are under their name. This includes property, bank deposits, personal loans and credit cards.

Providing these necessary documents for your car loan application, alongside meeting requirements, can aid in helping you receive car loan pre-approval.

How much can I borrow with a car loan?

When it comes to purchasing a new or used car with a car loan, your ability to borrow a certain amount of funds or ‘borrowing power’ is determined by your credit rating in combination with factors such as income, assets and liabilities and details of specific vehicle. Put simply your borrowing power is the maximum amount of money a bank or lender is willing to provide to fund the purchase of a car.

It’s important to factor in borrowing power when applying for a car loan as it can determine how much you can borrow and therefore, how much you can spend on a car. However just because you may be approved for a certain amount, it doesn't mean you should borrow the full amount. You should only borrow what you can afford to repay, taking into account your income and other expenses.

Shopping around for the best deal on a car loan, including interest rate and comparison rate, can help you find an option tailored best to your financial position. Taking advantage of tools such as car loan calculators can also be of benefit, providing an estimate of your car loan repayments - whether that’s weekly, fortnightly, or monthly. This can be useful to determining how such an expense can fit alongside significant living costs such as mortgage repayments, rent and groceries.

How can I qualify for a lower interest rate on a car loan?

When shopping around for a car loan, there are a number of methods to ensure you are receiving the most competitive interest and comparison rate available. These include:

  • Checking your credit score: Your credit score is one of the most important factors that lenders consider when deciding whether to approve your loan application and what interest rate to offer. A higher credit score usually leads to a lower interest rate. Therefore, it's a good idea to check your credit score and take steps to improve it if necessary before applying for a car loan. In Australia, credit scores can be checked using one of three credit reporting agencies, those being Experian, Equifax of illion.
  • Choosing a shorter loan term: While car loan terms can range from three up to seven years, the longer your loan term, the more interest you'll pay over the life of the loan. Therefore consider choosing a shorter loan term, or a loan that allows for additional repayments, to save money on interest.
  • Make a deposit: Making a deposit can lower your loan-to-value ratio (LVR) and reduce the lender's risk, which may result in a lower interest rate. Consider aiming to make a down payment of at least 20% of the car's value if possible.
  • Shop around for the best deal: Different lenders may offer different interest rates, so it's important to shop around and compare rates from several lenders before making a decision. Online comparison tools can be useful for this.

If you’re looking to upgrade to a new set of wheels, Carloans.com.au can save you money on your car loan by using our special brokerage network to find a good deal for you.