It can be quite difficult to get approval for a car loan with bad credit or no credit at all. To get a car loan, there are a few things you need to know. We are here to help you by showing you the most important factors that influence the approval of your car loan.
Factors Affecting The Approval Of your Auto Loan:
- Credit score: The credit score is very important when it comes to getting your car loan approved. This is the main thing that lenders see before they lend you the money. Your credit history will show whether or not the lender will approve your money and want to work with you or not. If you have a bad record, it does not mean that you will never get a loan. There are a few bad credit auto lenders who will help you out even if you have a bad credit history.
- Debt to income ratio: This is the ratio between the debt you owe to your other lenders and the amount of money you earn. Lenders check this before they work with you. Even if you have a really high income but owe a lot to other lenders, you will have a hard time getting your loan approved, so the lower this ratio is, the better.
- Savings and investments: The amount of savings you have in your account becomes essential when you retire. Lenders will take a copy of your bank statement, your pension account statements and investment statements (up to 3 years back). They will also look at your career history, for example how long you worked for your current employer. This gives the lenders a good estimate of how much money you will earn in the future (if you are still working).
- Social media accounts: Lenders tend to conduct surveys on social media sites to research potential buyers and to check if buyers are irresponsible with their money. You need to make sure that you are not in debt to other lenders; this is how lenders define “bankruptcy”. If you don’t have money, you have a better chance of getting a loan than if you have money and owe other lenders a lot.
- The age of your car: Let us explain what we mean by the age of your car. It helps the lender to determine how much interest you will be charged and whether or not you will get approval for the car loan. If it is a new car, you will usually get an offer at a lower interest rate. One simple reason for this is that if you are unable to repay the loan, the lender will seize your car, and since your car is new, it will have a better value on the market to help make up for the loss.
- Length of the loan: You have probably realized that lenders look at a number of specific factors when lending to you, and a key factor is how long you want to take the loan. If you are taking out a loan for a shorter period of time, then there is a high chance that it will be approved, even if the amount is large, so remember that lenders always prefer the shorter-term loans.
Remember that even if your credit rating becomes a big factor in whether or not you get approval, don’t give up if you have a bad credit rating. Some car lenders for bad credit are there to help you. We hope that you have a better understanding of the factors that affect the approval of your car loan. If you have any further questions, please write them down in the comment section below.