In order to get an auto loan approval there are certain requirements that you are going to have to meet. The lender has to be satisfied that you are a good credit risk in order to give you a loan. Here are a few basic auto loan approval requirements.
1. Good Credit History
The first thing that a lender is going to look at is your past credit history. Your credit history tells lenders the majority of what they need to know in order to make a lending decision. With your credit file, they can pull up payment information on all of your past accounts. When you open a new credit account, the creditor will provide information about that account to the major credit bureaus. Credit bureaus keep track of all of this information on your permanent credit file. They will then provide this file to lenders when they want to decide whether or not they should give you a loan. The credit bureaus also use this information to provide you with a credit score.
Your credit score is a compilation of your entire credit history in one number. The higher the number, the better your credit history has been. Most lenders will quickly glance at your credit score before they get too involved in your credit history. The formula used to complete your credit score is based on payment history, amount of debt on credit accounts, credit mix, and several other factors. If you have always paid your bills on time, never defaulted on a loan, and do not have a lot of debt, there is a good chance that you will have a decent credit score. This tells auto lenders that you would potentially be a good person to lend money to for a new car.
2. Income Amount
When trying to get approved for a new car loan, the next thing that they will look at is your income amount. The auto lender it going to want to know that you make enough money to make your monthly car payment. They will require you to provide them with some kind of documentation that you make the amount of money that you claim. You may have to provide them with pay stubs from your job, W-2’s, and even financial statements. They might like to see that you have a certain amount of money in the bank before they will consider giving you the loan that you need.
3. Debt Situation
The auto lender is also going to take a detailed look at your debt situation. They will look at all of your debt accounts and see the status of all of them. They want to know that you do not have too much debt to satisfy your obligation with them. They use debt-to-income ratios to decide if your debt situation is in line with your income amount. If you have too much debt, you may not be able to qualify for a loan. The lower the debt0to-income ratio, the better your chances are of securing an auto loan.