How We Secured a 10.49% Rate Despite Wage Advance Red Flags
If you have ever used a wage advance service, then this week’s case study is a must-read.
Over the last few years, it has become increasingly common for people to rely on these services to fill gaps in their budget or bring forward regular purchases.
Even if this habit is well managed, most car loan lenders view this as a high-risk indicator, and it reduces your choice of lender significantly.
Every single use will have a direct impact on your car loan options.
In this week’s story, our brokers secured an incredible rate for someone who had fallen into the salary advance cycle.
Scenario
A customer from Chirnside park on the eastern fringes of Melbourne, ViMelbourne came to us looking to buy a 2016 Subaru WRX for around $25,000.
He was a first-time borrower and therefore had no credit history. A challenge we often see with customers in their early 20s.
We have discussed the challenges of a thin credit report in many past editions, so I won’t dwell on this too much, but one common outcome of this profile is that the lender will insist on reviewing 90 days’ worth of bank statements.
And this can sometimes uncover additional challenges.
On the plus side, he had been working full-time as an apprentice mechanic for over four years.
The stability of income and growing earnings was a big plus in this case.
The Roadblocks
Unfortunately, the bank statement review uncovered a series of transactions from a well-known Wage Advance provider.
While lenders are generally tolerant of a level of Buy Now Pay Later use, general salary advances are considered to be a modern version of payday loans (even though they are technically not in that category).
This means an automatic decline with a lot of lenders.
But use has become so common that our broker team is well-rehearsed in what lenders have some tolerance, and where the line is for too much use.
The Gusto Strategy
We often see otherwise decent customers only able to access interest rates in the teens, and sometimes low 20% range due to using these services.
However, in this case, the customer only had one. And we knew just the lender who would accept this where he would still be eligible for a great rate.
Our broker spoke directly with the assessment team to confirm they were happy to take on a young, first-time borrower, highlighting his four-year employment history to offset the lack of a credit history.
The Result
The lender approved the full $25,000 for his Subaru WRX.
Despite having zero credit history and a wage advance app on his bank statements, we secured him an exceptionally competitive interest rate of just 10.49%.
If he used just one more wage advance product, he would not have been eligible with this lender at all, and only higher rates would have been possible elsewhere.
So not only did he achieve a strong result, he learned a valuable lesson in managing his finances while still early in his journey.
The Takeaway
If you are young and have a limited credit history, your bank statements will form a large basis for the loan assessment.
You should avoid using wage advance apps if you plan on applying for any type of finance.
But, if you have already done so, you need a broker who understands lender policy so you can access the best car loan for your situation.