When you find your dream car, and there is a line of buyers ready to snatch it up, you have to move fast.

But what happens if your financial profile simply isn't ready for a top-tier car loan?

Sometimes, the smartest financial move is to strategically accept a less-than-perfect loan today, with a plan to refinance it tomorrow.

This week’s case study perfectly highlights the power of using a stepping stone to finance your way to the solution you need.

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Customer of the Week

A 20-year-old borrower came to us looking for $15,500 to buy a privately sold 1997 Toyota Landcruiser.

Because it was a one-of-a-kind classic, she knew that if she didn't secure finance immediately, the seller was going to hand the keys to the next person in line.

However, due to a range of factors, mainstream lending was going to be difficult.

The Roadblocks (Round One)

When we assessed her profile, she had three major hurdles standing in her way:

• Zero Credit History: She had never had a credit card or a personal loan, meaning she was a completely unestablished borrower.
• Short Work History: She was only one month into her very first full-time role, and still on probation.
• The Asset Age: The Landcruiser was 28 years old and being sold privately, which knocks out the vast majority of standard car lenders.

Stepping Stones

Because her bank statements looked immaculate (no payday loan usage and good savings habits), we were able to secure an approval through a specialist sub-prime lender.

The catch? Because she was a young, unestablished borrower buying an old car, the rate was 22%.

We sat down with her and formulated a strategy:

1. Take the loan now to secure your dream car before someone else buys it.
2. Pay it perfectly for 6 to 12 months to build a rock-solid credit score.
3. Refinance to a much better rate once your profile is established.

She agreed, secured the Landcruiser, and got to work.

Refinancing

Recently, she returned to us to execute phase two of the plan.

She had followed our advice perfectly.

Her credit report was now established with a healthy score of 615, and she hadn't made any unnecessary credit enquiries.

The only curveball was that she had recently changed jobs and was only 2 months into a new full-time role.

However, because we were able to prove clear continuity between her previous job and her new one, we were able to successfully pitch her profile to a better lender!

The Result & Real-World Savings

We successfully refinanced her high-interest loan to a more competitive rate of 16.05%.

Even better, we structured the new deal as an unsecured loan.

This meant the new lender paid out her old loan in full and released the Landcruiser from any encumbrance.

She now fully owns the vehicle outright and can sell it freely whenever she pleases!

By selecting a lender with a small establishment fee ($475), the refinance stacked up well on the financials.

The Refinance Breakdown:

• The Loan Term: Reduced from 3.5 years down to 3 years.
• The Repayments: Dropped from $646 per month down to just $473 per month.
• Total Interest Saved:$3,462 over the life of the loan!

The Takeaway

If you had to take a higher interest rate in the past due to a bad credit score, a short work history, or an older vehicle, you do not have to be stuck with it forever.

By strategically monitoring your credit file and refinancing at the exact right moment, a great broker can help you drop your rate, lower your monthly repayments, and put thousands of dollars back in your pocket.

6 Things to Consider Before Refinancing

Refinancing can be a fantastic way to lower your interest rate and reduce your monthly repayments, but it isn't always the right move for everyone.

Before you break your current contract, you need to ensure the long-term savings outweigh the short-term costs.

When looking to refinance, it is crucial that you factor in your current loan's early exit fees, any establishment fees on the new loan, how your credit score has changed, and the current age and value of your vehicle.

​Read the full article here​

More from the Gusto Group

Gusto Finance is part of a broader family of businesses built to help everyday Australians across every stage of the buying journey:

• 🏠 Gusto Home Loans: We do for home loans what we do for car finance. Whether you’re buying, refinancing, or just want to know your borrowing power, our team compares options across a massive lender panel.
• 🚗 Gusto Auto: Our Brisbane-based used car dealership. If you want a seamless experience, you can buy a quality used vehicle directly from us while Gusto Finance handles the loan.
• 💸 Gusto Cash: Need access to funds fast? We provide flexible personal cash loans for when life happens outside of a standard car or home loan.