In the US, consumers take out auto loans when they need a new method of transportation. Financing a new or used car is a more affordable choice than buying the vehicle outright. A local lender explains what affects the consumer’s ability to get an auto loan.
Current Credit Rating
The consumer’s current credit rating could prevent them from securing an auto loan. Lenders must assess the credit scores to determine if the consumer is a risk. Consumers who want to try to get an auto loan should consider following steps to improve their credit scores first.
Repossessions on Credit History
Any repossessions on the consumer’s credit history are likely to turn lenders away. A repossession indicates that the consumer failed to pay back a previous lender and consequently lost their vehicle. More traditional lenders are less likely to take on the risk of extending a loan to the consumer. However, if the repossession is outdated, the consumer could request the removal of the listing and avoid a denial based on older than average credit details.
Verifiable Annual Income
The consumer must have a verifiable annual income. Lenders follow the necessary protocol and verify the income level reported on the auto loan application. Consumers who work for an employer won’t have to worry about verification as the lender will call their employer directly. Self-employed consumers, on the other hand, must provide their previous year’s income tax return to verify their income.
Current Monthly Obligations
All current monthly obligations are reviewed for the consumer, too. The income to debt ratio establishes if the consumer can afford an auto loan. Details, such as their rent or house payment, estimated utility costs, insurance, and other payments made each month must be disclosed to the lender. When establishing affordability, the lender adds all monthly obligations with the monthly auto loan payment and auto insurance requirements.
In the US, auto loans require consumers to meet credit score requirements and pay a down payment. The amount of the down payment depends on how much of a risk the consumer is to the lender. Several factors affect the consumer’s ability to get a loan including their credit history and annual income. Consumers who want to learn more about auto loans contact Consumer Portfolio Services right now.