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. Customer’s 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 you want to buy a new car, the information about the car is very important to the financial institution. Every financial institution has criteria they look out for in a car before deciding they want to finance the car. It could be 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.