4 Things Car Loan Lenders Look At

Working with car loan lenders could be the easiest way to secure financing for a new car. If you are in the market for a car and don't have the cash to buy one, financing may be your only option. While the process of applying for a new car may be relatively simple, the lender will look at several things to evaluate your creditworthiness. Here are a few things that car loan lenders look at.

1. Credit Score

Your credit score is the biggest thing that lenders look at. They will base a good percentage of their decision to lend upon your credit score. Therefore, if you have a good one, you should have few problems getting a loan. If you have a low score, you might have some issues getting a loan. Your credit score is basically a compilation of your entire credit history rolled into one simple number. The score is calculated using a complicated formula that is weighted towards certain credit criteria. Therefore, it gives the car loan lender an easy way to quickly get an impression of you as a borrower.

2. Income

Before they lend you several thousand dollars to buy a car, they want to know that you will be able to pay them back. If you don't have a job or some sort of income coming in, they are going to be less likely to give you the money that you need. They will have a ratio that compares your total debt to your income. If your income and debt do not meet the guidelines, they will not lend you the money. They may have to go with other riskier types of loans with higher interest in that case. Make sure that you can show some sort of income before you go into the car dealership to get a loan. It will make the process much easier on you.

3. Public Records

On your credit report, there is a section for any public record information. This is the section that tells them whether or not you have any judgments, bankruptcies, or liens against you. This is a very important criterion that helps them determine if you are worth the risk or not. If you have a bankruptcy in your past, it may be hard to get a good loan on a car. They tend to look at you as a big risk when that has happened in the last few years.

4. Length of Credit History

The length of time that you have been using credit is also a determining factor for them. They want you to have some sort of credit history for them to base their decision on. No one likes to be the first person to lend you money. They don't know how you will act with it and they might never see it again. Therefore, the longer that you have been using credit, the easier their decision will be.