Why can I get a $50,000 car loan when I can’t get a $10,000 personal loan? | Whiteboard Wednesday

Welcome to Whiteboard Wednesday I’m Paul Walshe, founder and CEO of Fair Go Finance So today’s topic is a question
we get asked from our customers frequently and that is why can’t I
access up to $50,000 on a car loan but not $10,000 on a personal loan. The difference in access to credit is
really governed by your credit history and the way the lender sees the level of
risk around you as a borrower. So in the case where you can’t or you’ve been
declined on an application for a loan up to $10,000 it may indicate your credit
history in the past has taken a knock or there’s something on your application
that the lender doesn’t like to look of and it raises a red flag.
In either case that lender typically is going to see you as being credit
impaired or having bad credit. So how do you access a larger amount
with bad credit? It’s typically by offsetting the risk that the lender sees
around you as a borrower and that is done through the use of security on the
loan. Now in residential mortgages that’s the house but in car loans and personal
loans it’s the car. So as lender if you would go into default as a borrower on
the loan the lender would repossess the car typically and sell that car reducing
the balance that you owe to the lender. By having that recourse the
borrower can access more money and the lender feels more comfortable advancing
larger loan amounts to a borrower. So it also provides a benefit to the
borrower and to you as a customer of reducing that interest rate cost on your
loan. Some of the options you have, if you have
bad credit and you are looking for a larger loan, are to either take a car loan
which is secured if your purpose is to buy the car or to use your existing car as
security on a future loan. That may increase your access to credit but also
reduce costs that you pay for that credit. Hopefully you found this useful
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thanks very much

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