- Temporary residents in Australia often face challenges when seeking financial services, including car loans, but there are options available.
- Many lenders require borrowers to be Australian citizens or permanent residents, but common acceptable visas include the 482 temporary skills shortage visa and student visas, while working holiday or bridging visas may not be favored.
- To qualify for a car loan, temporary residents typically need a decent income, some form of credit history, a visa with sufficient validity, identification documents, a deposit, and take out comprehensive insurance for the vehicle.
- Temporary residents should be prepared for higher interest rates, limited loan options, and stricter eligibility requirements.
While many lenders require the borrower to be an Australian citizen or permanent resident, common acceptable visas include the 482 temporary skills shortage visa, and student visas. Visas that provide pathways to permanent residency are generally looked upon more favourably, while working holiday or bridging visas may not.
Types of Car Loans Available to a Temporary Resident
When comparing options in the car loan market, there’s generally four popular choices.
Secured Car Loans
These loans are secured against the vehicle you are purchasing. If you default, the lender can repossess the car. The primary benefit of secured car loans is that they generally offer lower interest rates due to reduced risk for the lender.
To qualify for a secured car loan, you will need to provide proof of income, residency status, and sometimes a deposit. Because they are using the car as security, there’s a chance they could be more relaxed in other areas such as your type of employment.
Unsecured Car Loans
Unlike secured loans, unsecured car loans do not require collateral, making them riskier for lenders. The benefits include more flexibility and might have quicker approval processes.
However, these loans come with higher interest rates and are generally more dependent on your credit score or history. If you have a thin credit history you might face a higher interest rate, even if you have stable, high-paying employment.
Novated Leases
A novated lease is a three-way agreement between you, your employer, and a finance company. One of the significant benefits of a novated lease is that the payments are made from your pre-tax income, potentially reducing your taxable income. After the lease period you will also likely be granted the opportunity to purchase the vehicle.
Typically, novated leases are available to those with full-time employment and residency status. They might preclude those on temporary skilled work visas.
Benefits of leases typically include a bundled price for servicing, maintenance and insurance. On the other hand there may be restrictions as to how you use the vehicle, or how many kilometres it can do per year.
Personal Loans for Car Purchase
Personal loans used to purchase a car offer flexibility in both usage and repayment terms. The eligibility for personal loans depends on your credit history, income, and residency status.
These loans can be a good option if you prefer not to secure the loan against the vehicle. This can open you up to a wider variety of vehicles, however usually comes at the expense of a higher interest rate.
Banks' Visa Requirements for Car Loans
Below is a general roundup of the major banks' personal or car loan visa requirements. Other lenders might differ. Note, eligibility was correct at the time of writing, and might be different between loan types.
ANZ
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Includes all temporary visa arrangements that allow one to work in Australia; may be extendable to family members. Also includes business visas. Working holiday visas aren’t accepted.
Commonwealth Bank
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Many working and student visa types are acceptable, including the 482. Working holiday and bridging type visas are not.
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Visa must be valid for a minimum one month from the end of the loan term.
NAB
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Many visa types are accepted.
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Ineligible visas: Visitor Visa (exception, a Special Category Visa - NZ Citizen is acceptable), Working Holiday, Student, Exchange/gap year, Transit/short stay/seasonal and Bridging.
Westpac
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Westpac accepts many visas, particularly skilled work and business visas, and their partners.
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100, 103, 113, 124, 132, 143, 151, 155, 176, 186, 187, 188, 189, 190, 191, 200, 201, 202, 203, 204, 457, 482, 487, 489, 491, 801, 820, 835, 856, 857, 858, 887, 888, 890, 891, 892, 893 are accepted.
What You’ll Need to Qualify for a Car Loan
Securing a car loan as a temporary resident involves meeting specific criteria, which may vary between lenders. Common requirements include:
Decent income
You’ll need to show evidence of a stable, fairly well-paying job if you’re on a work visa. Income requirements could be at least $50,000 per year, and may be higher for visa holders compared to permanent residents or citizens.
You will likely need to provide at least the past two payslips plus bank statements showing where your salary is paid into.
A credit history
You might need some form of credit history or profile in order to boost your chances of approval. Some lenders might be lenient for new residents with limited local credit history, and allow a valid international credit report.
If you’ve read this and started panicking, don’t; comprehensive credit reporting regulation introduced in 2014 means that all kinds of various things are on your credit report, such as your phone bill and electricity account. If you have paid these off on time, you boost your chances of having a decent credit score.
An appropriate visa length
Common acceptable visas include 457, 482, and student visas. However it’s not usually enough just to have the right visa.
Lenders typically require a visa with at least six months of validity remaining, or a period of time valid after the car loan ends. Considering many car loan terms are for three years or longer you’ll want to make sure your visa is valid for longer than this.
Further, you’ll usually need to demonstrable intent to reside in Australia for a significant period. Longer visa validity may increase approval chances.
Identification documents
If you don’t have an Australian drivers licence you’ll likely need to supply your passport at the time of application. You might also need to provide payslips, bank statements, an electricity or phone bill to confirm your identification. You’ll also need to provide evidence of an appropriate visa.
On the driving side of things, if your drivers licence from your home country is in another language, you’ll likely need to get an international drivers permit or licence.
A deposit
For some, but not all lenders, a deposit may be required. This reduces the loan amount, and also demonstrates fiscal responsibility. You are also providing ‘equity’ in the car, which can be handy if you write it off (e.g. crash it) or need to sell.
A handy guide is to aim for a 10% deposit, which on a $50,000 vehicle purchase is $5,000.
Appropriate insurances
Many lenders when lending for new cars require borrowers to take out comprehensive insurance. This is to cover your vehicle and others in an accident, and differs to the state-run CTP program, which is for injury liability.
Note that if you’re new to the country, have a limited driving history, or are using the vehicle for rideshare you will likely face a more expensive premium.
What to Keep in Mind Before Applying
There’s a few key ingredients to keep in mind before applying for a car loan as a temporary resident or visa holder.
Higher Interest Rates
Temporary residents often face higher interest rates compared to citizens or permanent residents. This is especially true for unsecured car loans or if your credit rating is not strong. Lenders perceive temporary residents as higher-risk borrowers due to the uncertainty surrounding their long-term stay and income potential in the country. Therefore, it's essential to be prepared for potentially higher monthly payments.
Different Terms or Loan Types
The range of lenders and loan types available to temporary residents is often more limited. Non-residents may not have access to the same variety of loan products as citizens or permanent residents. Some lenders may offer specialised loans for non-residents, but these can come with less favorable terms or higher rates. It's crucial to research and compare different lenders to find the most suitable loan options for your circumstances.
Stricter Eligibility Requirements
As a temporary resident, you will need to provide additional proof to demonstrate your ability to repay the loan. Since you may not have an extensive financial history in Australia, lenders will require other forms of assurance. This might include having a higher-paying job in a permanent position, providing a substantial deposit, or agreeing to stricter loan terms or a lower loan amount. Ensuring you have stable employment and sufficient savings can significantly improve your chances of approval.
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