Actual application for the loan is often required to unravel lenders’ stand on your loan application process. However, taking cognizance of your chances of being approved and maximizing it is not rocket science.
Online lenders are quite different from the set of criteria and various approaches used in evaluating auto loan application process. Some use individual scorecards which stem from years of lending experience to decide the application approval or otherwise rejection. This implies that a rejection from one lender is not mean rejection in others.
Several factors determine auto loan approval or rejection, but what they have in common is the credit score.
Lenders are different in the approach,and so are loan consumers. Borrowers have unique financial conditions and different credit score as a result of the credit history.
The importance of good credit score cannot be overstated as borrowers with good credit score are more likely to get their auto loan approved with more appealing terms when compared to those with poor credit history.
Definition of Good and Bad Credit
Bad credit is adjudged to be around 600 FICO score and below as stated by financial institutions such as National Credit Reporting Association, Consumer Federation of America, and Investopedia.
The primary reporting agents such as TransUnion, Experian, and Equifax are responsible for the compilation of credit report.
Other factors considered in auto loan application include the income level, work history, debt and expenses, the price of the intended vehicle to purchase, money down and many more.
Tips to Boost Auto Loan Approval
These are three of the smartest tips that can help to enhance auto loan approval especially with bad credit report;
- Making use of down payment
A down payment shows your commitment to the car purchase to tour lender and significantly reduce the potential loan amount needed to buy a car. A more substantial down payment wins you more benefits as it can earn you a smaller loan amount and a decrease in interest rate.
- Engage a Cosigner or Co-borrower
A co-signer is someone willing to take responsibility for your loan in case you default. A co-borrower is a joint applicant who has the same right to the use and the ownership of the car as you. You and the Co-borrower are tasked in repaying the loan.
- Build a good credit report
According to the Consumer Financial Protection Bureau, practicing good habits such as staying with your credit limit, paying bills on time and applying for only the credit needed will help you to establish a good credit score.
As recommended by the Bureau, without a good credit report you can improve your loan approval chances by obtaining a store card, becoming an authorized user on someone else’s card or adding a Cosigner and using a joint application.
How long does it take to get a loan approved?
Of all the loan options available, online lending has proven to be the quickest and most accessible. The loan application duration takes a considerably shorter length when compared to the other alternatives.
A pre-approval from the online lender that you can walk into a dealer full of confidence.
Knowing your expectations when applying for a loan can help his pressure and give you the confidence you need to get your loan.