Most people will have to get an auto loan in order to get a car. The requirements needed to get a loan can vary from lender to lender. However, there are factors that most lenders require in order to approve you for an auto loan.
Credit History and Score
Lenders know that they are taking on a risk every time that they approve someone for a loan. However, they consider people who have subprime or bad credit to be more of a risk than people who have good or excellent credit. Not only do lenders look at the credit score, but they also look at your credit history. Keep in mind that if your credit is poor, then you may need to get a co-signer. The co-signer will be responsible for paying off the loan if you are unable to.
Lenders know that a person who is making a decent amount of money is more likely to pay the loan back than someone who has a low income. That is why they will likely ask for income verification before they approve you for a loan.
Time on the Job
Lenders prefer to lend to people who are stable. They often look at how long someone has been on the job before they lend them a loan. Studies have shown that people who have been on their current job for at least one year are more likely to be approved than those who have been on their job for a shorter amount of time.
Lenders want to make sure that adding another loan will not overextend you financially. That is why they will look at your debt-to-income ratio. They prefer that your debt-to-income ratio by less than 50 percent. They also want your car payments to be no less than 20 percent of your current income. For example, if you are making $2,000 per month, then your payments should not be more than $400 per month.
Most lenders require that you make a down payment. There are several ways that you can make a down payment. You can make a down payment with cash. You can also trade in an old car. If you are not able to make a down payment, then you will have a hard time finding a lender to work with you. A down payment can lower your monthly payments. It can also reduce the amount of interest that you have to pay. If you need an auto loan with zero down, give New Roads Auto Loans a call at 800-924-0364- They can help .