Traditional Australian lenders, such as banks, typically lend money only to Australian citizens or permanent residents.
Both these classes of applicants generally have a credit history, but as a 457 visa holder you likely don’t have a credit history in Australia.
Temporary resident visa holders often find it hard to secure finance from mainstream Australian lenders - but there are alternatives.
My car loan application has been rejected. What can I do?
If you’re a 457 visa holder whose car loan application has been denied by a major lender on the basis of your resident status it may be possible for you to secure car finance from a specialist Australian lender.
You should talk to a finance broker or specialist car finance lender about your options, because there are specialist finance options available for car finance if you’re a 457 visa holder.
Most lenders offering 457 visa car finance classify this kind of lending as relatively high risk - and for this reason it’s essential to get expert advice concerning the best lenders to approach, and the loan criteria that they apply in assessing applications for approval.
Some conditions may be attached to a 457 visa car loan agreement - but for many 457 visa holders, specialist car finance can be a good option for temporary skilled workers who require a vehicle while in Australia.
What is a 457 Visa?
The 457 Visa is a temporary work visa allowing skilled workers from overseas to work in Australia subject to sponsorship by an approved Australian employer who cannot find an Australian citizen or permanent resident to do the work.
457 Visas are granted for a period of up to four years. (For some occupations the maximum duration permitted under a 457 visa is limited to two years.)
Note that in April 2017 the Australian Prime Minister Malcolm Turnbull and Immigration Minister Peter Dutton jointly announced the abolition of the 457 Visa.
As things stand currently, 457 visa applications are closed and the visa has been superseded by an all-new Temporary Skill Shortage (TSS) visa designed to support approved businesses by addressing genuine skills shortages.
For practical purposes, into the future, the TSS visa will replace the 457 visa for skilled workers from overseas.
What is the term of the loan I can expect?
Lenders willing to lend funds to 457 visa holders have strict requirements in relation to the term of the loan.
In general the loan must end before the 457 visa expires. This is unlike other car loans in Australia, which are typically taken out over five to seven years.
This requirement exists irrespective of any commitment by an approved employer to extend your sponsorship.
In other words, promises or commitments by the sponsoring employer to extend your 457 visa once it expires will not be considered by specialist lenders. The extent of your current 457 visa is all that matters, as far as your loan application is concerned.
(This is because lenders do not want you to leave the country permanently while your loan with them remains active. The risk of permanent abandonment of the vehicle, and default on the remaining payments in this situation is deemed excessive.)
Similarly, any pending visa extension application you may have lodged with the Department of Immigration, is not considered by potential financiers.
In the interest of managing risk, lenders view the expiry date of the 457 visa as an absolute - and this date, which is determined by the Federal Government, is used to determine the maximum possible term of any loan advanced to a 457 visa holder.
How is the loan secured?
In general, the vehicle is used as the primary security against the loan. In this way, should you default on the payments or abandon the vehicle and return to an overseas country, the lender may then take possession of the vehicle and sell it to recover any outstanding funds.
Additional conditions may be attached to the loan. For example, to mitigate risk a lender may require you to commit a specified deposit to the purchase.
This financial stake in the car minimises risk to the lender by minimising the funds outstanding in the event of a default, and it also reduces the likelihood of vehicle abandonment should you leave the country and not return.
Am I eligible?
Specialist lenders know that not all 457 visa holders are equal in terms of borrowing and repayment capacity.
Applicants for this type of finance typically vary widely in terms of cash on hand and asset backing while in Australia. Incomes vary widely as well, as do working conditions and entitlements.
Problematically, 457 visa holders typically have no credit history in Australia, and this makes it quite difficult for lenders to assess the risk posed to them in lending the funds to various applicants.
However, each application is carefully assessed, and supporting documentation - such as bank statements, payslips and immigration documentation may be required to approve a 457 visa car loan application.
Lenders will generally also consider how long you have held your current job, how long you have already been in Australia, the nature of your work and of course, your income.
Visas with a path to potential permanent residency are often viewed favourably. The variability in applicant details accounts for the wide variation in terms and conditions between 457 visa car loans.
What interest rate will I get?
Ultimately, for all car finance (not just 457 visa car loans) lenders assess applications on the basis of risk.
Strict criteria are used to make each approval determination.
Interest rates vary in relation to the risk assessed by the lender.
Because lenders take financial risk very seriously it’s important to be completely honest in relation to all information you provide when applying for your loan.
Overseas credit history is generally not taken into account in assessing applications. Because 457 visa holders generally have no Australian credit history to assess, greater emphasis is often placed upon the applicant’s income, employment status and deposit history.
Generally you will need an Australian bank account into which your income is deposited, as well as provable savings arising from your income in Australia.
Whilst the mainstream lenders may not want to offer you a car loan, there are still options available.
Finance brokers and car loan specialists can steer you in the right direction.
The length of the loan will be determined on how long is left on your 457 Visa, so it’s a good idea to start the process sooner than later.
Knowing the information explained in this post will put you a better position to getting a car loan in Australia.