It can be pretty difficult trying to get an approval of auto loan with bad or no credit. You need to know a couple of things to get your auto loan approved. We are here to help you with it by showing the major factors that affect the approval of your auto loan.
Factors Affecting The Approval Of your Auto Loan:
- Credit Score: Credit Score is very important when it comes to getting your auto loan approved. This is the main thing the lenders see before lending you the money. Your credit history will tell whether the lender will approve you the money and wants to work with you or not. If you have a bad score, then it doesn’t mean you will never get a loan. There are a few bad credit auto lenders that will help you out even if you have a bad credit score.
- Debt-income ratio: This is the ratio of the debt you owe to your other lenders with the amount of money you make. The lenders consider this before working with you. Even if you have a really high income but you owe a lot to the other lenders then you will get a hard time getting your loan approved, so basically, the lower this ratio the better.
- Savings and Investments: The amount of savings you have in your account becomes essential if you are retired. The lenders will take a copy of your bank statement, retirement account statements and the investment statements (of up to 3 years back). They will also look at your employment history, like how long you have been working for the current employer. This will give the lenders a good guess on how much money you will be making in the future (if you are still working).
- Social Accounts: Lenders tend to take surveys on the social media websites to find some potential buyers and to check whether the buyers are irresponsible with their money. You need to make sure you are not in debt to other lenders, that’s how ‘bankruptcy’ is defined by the lenders. If you have no money, then you have a higher chance of getting a loan than if you have money and owe a lot to other lenders.
- The age of your car: Let us explain what we mean by the age of your car. It helps the lender determine how much interest you will be charged and whether you will get an approval of the auto loan or not. If the car is new, then you will tend to get a lower rate offer. A simple reason for this is, If you are not able to pay the loan back then the lender will seize your car and since your car is new it will have a better value in the market to help them recoup with the loss.
- Length of the Loan: You have probably realized that lenders look for some particular factors when it comes to lending you money, and an essential one is for how long you want the loan to be. If you take a loan for a shorter period of time, then it will have a high chance of getting approved even if the amount is big, so remember lenders always favor the loans with lesser length of time.
Remember that even though your credit score becomes a huge factor in whether you will get an approval or not, do not give up if you have a bad credit score. Some bad credit auto lenders are there to help you out. We hope you have understood more on the factors that affect your auto loan approval. If you have any more questions then write them down in the comment section below.