The 'IOU' of the Auto World: Securing an Auto Loan

You're in the market for a vehicle, which means taking a deep dive into your search for "auto loans near me" to find out how you can afford your next car, truck, or SUV. After all, you might not have tons of cash sitting in your bank account, and even if you did, you don't want to drain your savings with a single purchase. Fortunately, auto loans don't require either and allow you to borrow money from a lender to make your purchase and then repay the amount with interest over a term or set length of time. So, how hard is it to get a car loan? It all depends on your credit history.

Your Credit Score

Your credit score is a three-digit number that will follow you throughout your adult life, whether you're buying a car, purchasing a house, or applying for a credit card. This number is what lenders look at to determine the risk of lending you money and the rate of interest to charge on the borrowed amount or principal. The higher your credit score, the better chance you'll get approved and the lower the interest rate because you have proven your ability to repay your debt.

The Good, Very Good, and Excellent

There's no one-size-fits-all rule that a lender has to accept a certain credit score. Instead, each lender sets specific standards for what they will or will not approve. These standards are based on the standard credit score range of 300 to 900. Scores that fall between 300 to 559 are rated poor, while a score between 560 and 659 is fair. Good scores range between 660 and 724, very good scores between 725 and 759, and excellent scores between 760 and 900.

The Method Behind the Madness

Your credit score isn't a random number pulled out of the sky. Instead, it's determined by two primary credit bureaus–TransUnion and Equifax–that collect data about your financial history, culling that information into five factors to determine your score. Those factors are payment history, credit utilization, credit history, public records, and credit inquiries.

Here's how each factor plays a role in your credit score:

• Payment History (35% of your score): looks at payments on current and past debts, taking into account missed and late payments as well as loan defaults.
• Credit Utilization (30% of your score): looks at how much credit you're using in relation to available credit. Ideally, you'll want to keep your ratio under 35%, which means never maxing out your line of credit.
• Credit History (15% of your score): looks at the length of time you've had your accounts open; in this case, the longer your history, the better because it shows your ability to handle debt responsibly.
• Public Records (10% of your score): looks at factors like bankruptcies, any credit turned over to collection agencies, and a healthy mix of revolving credits and installment loans.
• Credit Inquiries (10% of your score): looks at how often you request new credit or how recently you've applied for a loan. Frequent hard inquiries indicate financial difficulty and that you need money, while soft inquiries are harmless and occur when you look at your score.

Your Credit Score and Auto Loans

Your credit score plays a significant factor in how easy or difficult it is to secure an auto loan. Lenders also consider a few other things like your debt-to-income ratio, assets, and your employment, such as whether you're a contract worker or a full-time employee. These factors give lenders a bigger picture of how likely you are to repay your debt. Of course, the higher your credit score, the easier it is to get approved for a loan because it shows that you handle your debt responsibly. The risk that you won't repay your loan is minimal, making it easier for a lender to say "yes."

Getting approved for an auto loan can be difficult if you have a low credit score or don't have a strong credit history. However, there's no reason to lose hope thanks to companies like us offering bad credit car loans. Factors like your debt-to-income ratio, type of employment, and assets all play a role in your credit score. How so? Let's say that you lose your job, which eliminates a steady income and forces you to rely on a credit card to pay the bills for a few months. Your vehicle breaks down in the middle of your unemployment, leaving you without reliable transportation. It seems impossible to qualify for a loan with no income and mounting debt.

By working with a variety of lenders, we can work with individuals with all types of credit. So whether your credit score is poor or you're still navigating the waters of bankruptcy, we're here to help. Why? Because we believe that every Canadian deserves the opportunity to get behind the wheel of a safe and reliable vehicle without complete financial overwhelm. Our goal is to help you navigate your way back on the road to financial success.

How Do We Do It?

Most dealerships lure you in with high-pressure sales tactics and an enticing monthly car payment at a low-interest rate. What they don't say, however, is that there are specific requirements to secure such a great deal. Your credit score has to be almost perfect, and every factor–from your income and assets to your debt–has to align perfectly. For most people, this great deal is unattainable.

We believe in transparency and setting you up for immediate success. We give you actual numbers based on your financial background rather than enticing you with low monthly payments that are only realistic for a small portion of the population. For example, our payment calculator helps you determine your buying power based on your ideal monthly payment, the value of your trade, and any down payment you're planning to make. Since the tool allows you to choose the term and interest rate, you know what you can afford.

Believe it or not, setting your budget is the hardest part of the process. Once you know how much you can spend, it's a matter of completing our online loan application. We tailor our inventory to your needs based on the information you provide in the application. In turn, you have a private selection to choose from where every car, truck, or SUV is affordable and attainable. From there, saying "yes" to the vehicle of your dreams is easy and entails finalizing the paperwork and scheduling free delivery of your new vehicle to your home or office.

Difficulty Is a Matter of Perspective

How hard is it to get approved for an auto loan? It turns out that difficulty is a matter of perspective. Imagine that your family member comes to you and asks for a $1,000 loan. You know that he's a responsible individual and that his promise to repay the loan is good. This makes it a little easier to say "yes." Now, let's say that your family member isn't reliable or good at managing his money. Is it as easy to say "yes" then?

To lenders, you're a lot like a family member asking for an "IOU." Lenders, however, are acutely aware of the risk that comes with lending large amounts of money, and that's why they look at a variety of factors like your credit score, the principal or amount borrowed, your employment, and your debt-to-income ratio. This information helps them determine what type of family member you are when it comes to repaying that "IOU." If you are still worried about getting a loan, contact us and we will help you find the best loan possible.