Car Loans – The Lender’s View
Getting a car loan today is getting easier. The tightening we have seen in the economy is finally starting to shake out a bit and lenders are beginning to lend again. Even though the economy is improving, lenders still look at a few key factors when making a credit decision. Regardless of your credit history, here
are a few things that a lender looks for when reviewing your car loan application.
The lender reviews your employment situation and income to see if you have the ability to pay for the loan in which you are applying. Most full time jobs are considered but lenders do not take into account income from seasonal or part time employment unless you can prove that you have worked at this position for a long period of time and can show that there is a good chance the income will be continual. They will want to ensure that you can prove your income with a current pay stub.
Lenders are always concerned, regardless of your credit score, of your stability and if they can locate their collateral (in this case a vehicle) in case something was to go wrong and you stopped paying for the vehicle. Stability includes both residence (you have lived in the same place or area for a long period of time) and employment (you are not changing jobs every few months so you income is stable). Most lenders require proof of residence which can be validated with a utility bill in your name which shows your current home address.
All lenders want to know that you are committed to the loan in which you are applying. One way to know this is down payment. Lenders are more likely to “stretch” and be more aggressive with their underwriting if you have a large down payment on the loan. A standard down payment required by most lenders is 10% of the purchase price of the vehicle. Anything north of 20% shows a strong commitment to the loan and a lender is more apt to be aggressive with their loan decision.
Many customers are reverting to online lenders for their auto financing needs. Online lenders allow you to apply from anywhere and get a loan decision back in just a few minutes.