If you wish to apply for new auto financing, there are several factors that you should be aware of that could impact your eligibility. Taking care of the following three things can help you get approved for the auto loan you seek without any issues.
Credit Rating
One of the most important factors lenders consider when processing loan applications is the prospective borrower’s credit score. As a key factor in determining your eligibility, it reflects your creditworthiness based on your past behaviour as a borrower. Your payment history, your use of credit, the length of your credit history, the types of credit accounts you use and any recent enquiries into your credit status all play a part in either augmenting or diminishing your credit rating.
A higher credit rating is preferable, as this means you are a lower-risk borrower and will thus be more likely to get approved. It will also yield you higher loan amounts and better interest rates. Conversely, a low credit score will yield the opposite and might even result in your loan application being denied.
Debt-To-Income Ratio
Another important factor that lenders will look at when assessing your application is how much income you earn compared to how much debt you owe. This is known as your debt-to-income ratio and indicates your capacity to make monthly payments without running into financial trouble.
Managing your monthly debt obligations is a key determining factor in determining whether you are a high- or low-risk borrower. Lenders prefer to lend money to applicants who can display a steady income with a manageable debt-to-income ratio. This reduces the likelihood of loan delinquency, protecting both you and the lender from issues further down the line.
If your income cannot cover your existing debts, or if adding another loan to your portfolio pushes your debt-to-income ratio above a manageable threshold, then lenders might view you as a high-risk applicant and deny you a loan or offer you a loan with very high interest rates.
Deposits
Your ability to make a deposit can significantly impact your eligibility for a loan. A deposit reduces the amount of money you will need to borrow, thereby lowering the lender’s risk and improving your chances of being approved.
It will also likely yield lower interest rates, lower monthly repayments and all-around better financing terms. Therefore, saving up some money to make a deposit before applying for a loan is highly advisable, as this will improve your eligibility.
At iCREDIT, we can help you secure a good deal on new auto financing by sourcing and comparing loan offers on your behalf. Chat with us today to find out more, or apply now to get that new car financed.