With an auto loan, the lender evaluates the applicant based on varying factors. While a borrower’s credit history, or credit score, is crucial when determining their qualification for an auto loan, it is not the sole determinant of approval. Many factors can affect an individual’s ability to access an auto loan and the rates they are provided.
Below are five alternative factors that can influence your auto loan approval.
A lender will want to know that you have a stable income and can make your payments on time. If you have been unemployed for an extended period or are currently unemployed, this could hurt your chances of getting approved for an auto loan.
If you are self-employed and haven’t filed taxes in several years, this could also affect your application. Your lender will want proof that your business is profitable and stable before approving an application with an insufficient credit history or insufficient income.
Debt-to-income ratio (DTI) is a metric that lenders use to determine whether you have enough income to repay your loan. It’s calculated by dividing your monthly debt payments by your gross monthly income.
If your DTI is too high, you may not be able to qualify for an auto loan. Lenders in Canada typically don’t like to see more than 42% of your gross monthly income going toward debt payments.
Down payments are typically between 10% and 20%, depending on the specific lender, but they can be higher. If you have a high credit score and good income, auto dealers for bad credit may be willing to offer you a lower down payment than they would require if you had a lower credit score or less income.
Remember that this isn’t just about your ability to repay the loan. It’s also about the risk the lender is willing to take. A larger down payment means you are reducing risk for them, so they will likely be more willing to approve your application.
Your vehicle’s age and condition can determine whether you are approved for a loan and the interest rate the lender will offer you. Hence, lenders will look at the number of miles on your car and how many years it has been driven to determine whether or not they will approve your application.
Lenders may be more willing to work with you on terms and rates if you have a well-maintained older vehicle. However, if you have an older car with significant mileage or want to finance a newer model, expect higher interest rates.
In conclusion, it’s important to remember that many factors go into auto loan approval. A credit score is just one of them. If you want to get the best deal on your next car, be sure to shop around and compare your options. Don’t forget about these alternative factors that can influence auto loan approval.
Our dealership has been Serving Calgary Alberta since 2013.
We specialize in used cars and always try to get the best deals for our customers.
Award-winning, family owned car dealership of pre-owned vehicles with several locations across the city. Lowest prices and the best customer service guaranteed.
Feel free to contact us and test drive one of our cars today. We value your business. Referrals are welcome and remember we pay cash for referrals.