When you’re looking to purchase a vehicle and a house, timing is everything. Many people don’t realize how applying for two major types of finance at the same time, or too close together, can affect their approval chances.
At Motorlease Vehicle Finance, we’ve seen too many cases where clients were approved for a home loan, only for it to fall through in the final stages because they applied for car finance during the waiting period. Here’s why it happens and what you should know before applying for both.
Why Applying for Finance for a Home and Car Together Is Risky
1. Your Debt-to-Income Ratio Gets Affected
Banks use your Debt-to-Income ratio to check whether you can realistically afford new debt. It’s the percentage of your income already committed to paying off existing loans and expenses.
- If you take car finance while your home loan is in progress, your DTI increases because you’ve added a new monthly repayment.
- When banks do their final credit check (often just before paying out your home loan, which can be up to 3 months after your offer’s accepted), they may decline your home loan if your affordability no longer meets their criteria.
Typical DTI Guidelines in South Africa:
- Below 36% is preferred
43% or higher is very risky, often declined
2. Multiple Credit Enquiries Damage Your Credit Score
Every formal credit application triggers a hard enquiry on your credit report. Too many of these in a short space of time raises red flags with lenders.
- It signals that you might be overextending yourself financially.
- It can lower your credit score and sometimes be just enough to turn an approval into a decline.
This is especially dangerous if your home loan is still in progress, as banks run one last check before the funds are released
3. Home Loans and Car Loans Are Viewed Differently
- A home loan is for an appreciating asset, seen as a long-term, wealth-building investment.
- Car finance is for a depreciating asset, which loses value the moment you drive it off the floor.
Banks consider this when assessing your risk profile, especially if your debt load is rising while your home loan is pending.
What Happens If You Apply for Car Finance While Waiting on a Home Loan to be Paid Out?
If you’re already approved for a home loan and apply for car finance while waiting for the house transfer:
- The bank will reassess your affordability.
- Your new car repayment could push your DTI too high.
- The bank could withdraw the home loan approval before registration, and we’ve seen this happen more than once.
Best Practice: Prioritise Your Home Loan First
Industry advice is clear: Always finalize your home loan purchase before applying for car finance.
Why?
- A home is a bigger, more valuable, and longer-term investment.
- Keep your DTI as low as possible for the home loan application.
It avoids unnecessary hard enquiries during a sensitive period.
Smart Tips for Managing Finance Applications
Get Pre-Qualified for a Home Loan:
Use pre-qualification tools from banks or bond originators. This uses a soft credit check and won’t hurt your score.
Space Out Applications:
If you absolutely need both, leave a few months between them. This reduces the impact of multiple enquiries and gives your credit score time to recover.
Keep Your Credit Profile Clean:
- Pay accounts on time.
- Avoid new credit applications.
- Maintain a low balance on credit cards (ideally under 30% of your limit).
Consult a Registered Finance Expert:
A finance house like Motorlease can help you structure your applications strategically to protect your long-term financial well being, but keep in mind, we specialize exclusively in vehicle finance.
Final Thoughts
While it’s technically possible to apply for both car finance and a home loan at the same time in South Africa, it’s not advisable. The risk to your affordability, credit score, and final home loan approval is simply too high.
Always prioritise securing your home loan first, and then reassess your financial position before applying for vehicle finance. If you’re considering buying a used car privately, get in touch with Motorlease Vehicle Finance, we will help you secure the best deal when the time is right.