What is the minimum credit score to buy a car in South Africa?
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by José Gonçalo
Complete guide with the best strategies to finance your new car with loans!
Most likely, you must love the feeling of driving a new car. To make that dream come true, you need more than the minimum credit score to buy a car in South Africa.
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What is the minimum credit score to buy a car in South Africa?
Indeed, the minimum credit score required to buy a car in South Africa can vary. In fact, the threshold score is set individually by each lender.
Car type is also another factor that may require a higher or lower score. However, a credit score of 650 or higher is generally considered a good score.
If your credit score is less than 650, it doesn’t mean you can’t buy a car. Indeed, creditors may still consider your application. However, you may face higher interest rates.
In addition, payment terms may be stricter. You may also need to provide additional guarantees.
Finally, it’s important to note that lenders in South Africa don’t just look at your credit scores. So there’s a lot more to worry about.
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Other factors considered in car financing besides credit score
In addition to credit scores, lenders will consider other factors when evaluating auto loan applications. Below are some of these factors:
- Income: Lenders will want to know your income to determine if you can afford the monthly car loan payments;
- Employment History: Lenders may also consider your employment history. This factor is important in determining your stability and ability to make payments. Indeed, a stable employment history can improve your chances of being approved for car finance;
- Debt-to-income ratio: This is the ratio of your monthly debt payments to your monthly income. Lenders will consider this ratio to determine whether you have enough income to pay off your car loan;
- Vehicle age: therefore, lenders may offer different rates and terms to finance new and used vehicles;
- Loan Amount: Lenders may have different requirements and fees for different loan amounts;
- Advance: this is the down payment you can offer when applying for a loan. In effect, a larger down payment can reduce the amount you need to borrow. This increases your chances of being approved for funding.
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Options for those who do not fear the minimum credit score to buy a car in South Africa
If you have a low credit score, there are several options available. Find out about some of these below:
- Saving for a larger deposit: A larger deposit can reduce the amount you need to borrow. Thus, you can improve your chances of being approved for car financing;
- Opting for a cheaper car: Choosing a cheaper car can also reduce the amount you need to borrow. This can improve your chances of being approved for funding;
- Finding a Co-Signer: You can find a co-signer with a good credit score. This can increase your chances of being approved for funding. In addition, this can result in better terms and interest rates;
- Apply for a secured loan: A secured loan requires collateral, such as a car or property. This strategy can result in better terms and interest rates;
- Improve your credit score: Indeed, this is one of the best strategies.
It’s important to note that you may be offered higher interest rates and stricter payment terms if you have a low credit score.
Thus, it is important to consider car finance costs and ensure you can afford the monthly payments.
Ways to improve your credit score before buying a car
Indeed, improving your credit score before buying a car can help you secure better terms and interest rates.
Here are some steps you can take to improve your credit score and get you closer to your dream:
- Check Your Credit Report: Obtain a copy of your credit report from a credit bureau such as TransUnion, Experian, or Compuscan. Then check for errors or discrepancies and report them to the credit bureau;
- Pay bills on time: Make sure you pay all bills, including credit card payments, on time. Indeed, late payments can negatively affect your credit score;
- Reduce outstanding debts: Pay off as many outstanding debts as possible. As we’ve said, creditors look at your debt-to-income ratio. Therefore, reducing outstanding debt can improve your score.
- Use credit responsibly: don’t reach or exceed the limit on your credit cards. Lenders want to see that you can manage credit responsibly.
- Avoid opening new credit accounts: this can negatively affect your credit score. Lenders want to see a stable credit history. So, maintain a healthy credit history by using credit responsibly.
Improving your credit score can take time. However, this effort is worth it. After all, a good score can guarantee much more than good rates on auto loans.
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