Does an Existing Car Loan Affect Your Personal Loan Application?

Yes — an existing car loan counts in your debt-to-income ratio, and it counts differently to a credit card. A credit card is assessed at 3.5% of its total limit regardless of balance, but a car loan is counted at its actual scheduled monthly repayment, exactly as it appears on your loan contract. There's no percentage or estimate involved.

How a car loan is actually counted

`DTI (debt-to-income ratio)` — the percentage of your gross monthly income already committed to debt repayments — includes every actual debt repayment you're carrying, and a car loan is counted at its real, scheduled monthly figure. There's no assessed percentage the way there is for credit card limits — a car loan repayment of $420 a month is counted as $420 a month, full stop.

This makes a car loan more predictable than a credit card in the DTI calculation, but it also means there's no shortcut: the only way to reduce its impact is to genuinely lower or remove the repayment, not to change how you use the account. For the full mechanics of how DTI is calculated overall, see Debt-to-Income Ratio for a Personal Loan in Australia.

What counts, and what doesn't

• Counted: the actual monthly repayment on the car loan, as it appears in your loan contract or bank statements
• Not counted: the outstanding balance, the car's value, or how much equity you have in it
• Not counted: extra repayments you've made — DTI reflects the scheduled repayment, not your actual payment history

Why this surprises people who expect it to work like a credit card

A lot of borrowers who've just read about credit card limits — where the limit counts regardless of balance — expect car loans to work the same way. They don't. A credit card is a revolving line of credit you could draw on at any time, so lenders assess the limit as a standing risk. A car loan is a fixed, amortising debt with a set repayment and a set end date, so lenders assess exactly what it is: the real number on the contract.

The practical difference: paying down a credit card balance without closing the card does nothing to your DTI. Paying down a car loan faster than scheduled — genuinely reducing the term — eventually removes the repayment entirely once it's paid out, but doesn't reduce the monthly figure counted while the loan is still active.

Why "amortising" is the key word

An amortising loan has a fixed repayment schedule set at the start — every repayment is already determined, which is exactly why a lender can count it as a known, unchanging monthly figure rather than something they need to estimate. A credit card has no such schedule; you could owe $0 or the full limit next month, which is precisely why lenders assess the limit instead of trying to predict your balance. The difference in how these two debt types are counted isn't arbitrary — it follows directly from how predictable each one actually is.

A worked example

Someone on a gross annual income of $85,000 — gross monthly income of $7,083 — is carrying:

• Car loan repayment: $450/month
• Credit card limit $12,000 → assessed at 3.5% = $420/month
• Proposed new personal loan repayment: $500/month

``` Total debt repayments = $450 + $420 + $500 = $1,370 DTI = ($1,370 ÷ $7,083) × 100 = 19.3% ```

This sits well under 50%. Now suppose their financial position changes — a second, larger car loan for a partner's vehicle is added at $580/month, and the credit card limit increases to $18,000 (3.5% = $630/month):

``` Total debt repayments = $450 + $580 + $630 + $500 = $2,160 DTI = ($2,160 ÷ $7,083) × 100 = 30.5% ```

Still comfortably under 50% — but the car loan additions moved the number more directly and predictably than the credit card change did, because there was no percentage involved. What you see on the contract is exactly what counts.

Where a car loan can push DTI over the line

Take the same household but with a smaller income — gross monthly income of $4,500 — carrying the same $450 car loan, a $420 credit card obligation, an existing personal loan repayment of $380, and applying for a $500 new loan repayment:

``` Total debt repayments = $450 + $420 + $380 + $500 = $1,750 DTI = ($1,750 ÷ $4,500) × 100 = 38.9% ```

Still technically under 50%, but with far less room — an income $500 lower than the first example turns a comfortable 19.3% into a much tighter 38.9%, even though every individual repayment stayed the same size. This is the pattern worth watching: a car loan repayment that's a non-issue on a strong income can be a genuine factor once income drops or other debts stack up alongside it.

What lenders actually look at

The repayment on your contract, not your intentions

Telling a lender you plan to pay the car loan off early doesn't change how it's assessed today — only an actual payout or refinance does.

Whether refinancing the car loan makes sense before applying

If a car loan repayment is a significant driver of your DTI, refinancing it to a longer term (lower monthly repayment, more total interest) or paying it out entirely are the two levers that actually move the number — see Debt-to-Income Ratio for a Personal Loan in Australia for the full list of DTI levers, several of which apply here too.

Multiple vehicle loans in a household

If you're assessed as a couple or jointly, more than one car loan repayment compounds quickly — worth checking your combined DTI with the T2 calculator before applying.

The T2 Borrowing Capacity Calculator takes your car loan and other debts into account alongside your income, and shows your DTI at each threshold so you can see exactly how much room you have.