When someone applies for a car loan, there are two choices for an auto lender. Approve or decline. That is it. Now the question is why? Why do auto dealers approve someone for a car loan or decline someone? It depends on several things. It depends on your financial situation and the willingness of the lender. It depends a lot on your credit rating and your income. Without a good credit score, it is really difficult to get approved for a car loan. It is not impossible. You might get approved, but pay upwards to 29.9%. Either that or put a really big down payment. Before you go and apply for a car loan, check the following subject we are going to discuss and see where you stand.
The most popular reason that lenders deny an application is from the consumer’s low credit score. A score of 620 or lower is considered a sub-par score. Any applicant can expect to be declined or pay a really high interest rate with this low of a score. When people apply for a car loan, they usually go to a credit union, bank, or the actual dealership. All of these places will take the credit score into account very seriously. Loaning money on a car is a risk. The risk is really high on a new car loan. Think about it. A person buys a new car for $30,000. When that person walks off the lot, that car can drop off to $25,000. If that person does not make a payment, the dealership has to put the car to auction and take a loss. If the person does not pay, the lender will do what is called a chargeoff. They are out money. Therefore, they are going to be picky when approving an applicant.
Here is a side note. When a creditor checks your credit, it is called an inquiry. It will lower your score by a point or two. Again, realize that when you go and apply for credit.
We will be back soon to discuss other reasons why you could be denied an auto loan. Have a great day and make it yours!