When you want to buy a new car on a loan, a financial institution is always involved in the car loan process. Without a financial institution, a car loan cannot be approved.
There are certain things financial institutions look out for before approving car loans. Some of these things are:
1. Credit bureau report: This report is a detailed summary of your credit history. It shows payment records from a person’s accounts, including the repayment of the loan to financial institutions. Every country has credit bureaus. Financial institutions usually check credit reports from the credit bureau before they make a credit decision.
If there is a record of a loan that was not paid off, the chances of getting your car loan approved can reduce.
2. Your income: It is important that anyone applying for a car loan, whether a business owner or a salary earner has a solid source of income. This source of income helps the financial institution determine the probability of the customer paying back their loan.
3. Information on the car being financed: When buying a used car, you must ensure you know as much as you can about it. This information may impact the amount a financial institution would loan you for the car. Key things to look at include; the age of the car, the mileage, the car brand, and other important criteria.
4. Confirmation of employment or business registration: Every financial institution has documents they need to verify the income of people applying for a loan. For salary earners, they would require confirmation of employment and for business owners, they would require a business registration document.
5. Debt-to-income ratio: This is also known as the DTI (Debt-to-income ratio). In some countries, you cannot use beyond 1/3 of your monthly income to repay a loan. This means that any repayment plan you choose for your loan, it must not exceed ⅓. If you are currently paying out an outstanding loan, it should not be more than ⅓ of your salary when added to the existing loan you are repaying.
When you get a car loan through the Autochek platform, you can be sure that the financial institution that financed your car would look at the key things listed in this article.