Harbor Credit Breaks Down Auto Loans (and How Auto Loan Applications Are Approved) by Colin AyresNowadays obtaining auto loans online has never been easier. Typically you'll come across forms that are not only short but simple too. If you're spending more than five or ten minutes filling in field after field you're probably just wasting your time. Instead it should take just a few minutes to submit the necessary information. Most lenders especially the most qualified will contact you within a matter of days sometimes hours to discuss your auto loan options. The same lenders will also have bad credit car loan options as well. So whether you are a prime or sub-prime candidate it shouldn't be too difficult to find a lender that can help. Car loans work like this: First you trade in your car for an agreed amount. Next you make a down payment. And the difference between the sum of those and the price of your new automobile is the amount you will need to borrow for your car loan. Here's the oversimplified mathematical formula:[(Total Price of Car) - (Down Payment + Trade-in Value)] = Auto Loan AmountWith car loans the Annual Percentage Rate or APR is very important. Your monthly payments are a function of the interest rate and the length of the car loan. APR is designed to help you understand the car loan's entire cost create a level playing field for lenders and prevent them from advertising low rates and then hiding fees. The better your credit is the lower the APR on your car loan will be. Many car loans offer 60- or 72-Month loan periods for smaller payments each month. Though lower payments may seem easier to manage the interest paid over the financed period means you pay more increasing the total cost of your car loan. To better prepare for the car loan process use an auto loan calculator - you'll find them on major lending websites - to estimate your payments based on a car's price length of the car loan and interest rate. By testing different auto loan scenarios you'll better understand what you are capable of handling. If you're financing a used car loan lenders may only approve it for a model up to 5 years old. The used car loans process is more restricted because much older cars are harder to resell. Some banks charge at least 2% higher APR on used car loans than they do for new car loans. Though many online auto loan providers today offer better rates. Whether it's a new or used car however applying for a bad credit car loan can be intimidating. But there are car loans for people with bad credit. Believe it or not you can control interest rates by understanding your finances your credit report and all related costs. If a bad credit car loan is what you are looking for request your credit report. This way you'll not only understand where you stand financially but you can also fix blemishes to improve your rating and APR. While the amount borrowed and interest rate are important parts of auto loans look at other factors too. Your auto loan term and the fees you pay for credit checks are crucial. Fees and interest shouldn't exceed the total cost of the car. If in the end you're not comfortable with the terms of any auto loan consider leasing. This is a great alternative to auto loans especially if you're battling with bad credit. To increase your chances of being approved for an auto loan do the following:* Fix your credit report - Correct mistakes and "charge offs" * Pay attention to your credit score - Know what APR you deserve * Close old accounts - Credit scores can suffer with them * Understand the process of car loans - Be prepared * Utilize an auto loan calculator - Test different APR scenariosHow Applications for Auto Loans Are ApprovedApplications for auto loans are approved (or disapproved) through a standardized process that involves a lender closely reviewing a list of an individual's financial statistics to gauge their eligibility. The following are those key factors. So before you apply for an auto loan have a look at what lenders look at. Income Your gross monthly income should be about $2000 per month or more. Debt-to-Income Ratio It must be less than 50%. Calculate this ratio by dividing the sum of your total debt (e g car payments credit card balances and unsecured loans; exclude mortgage or property debt) by the sum of your total income. Credit Reports A credit report must exist in your name and all information on the auto loan application must match it. Remember to complete all fields on the auto loan application accurately - with proper format and no typos. Most applications for auto loans are approved or declined automatically based on entered data. FICO You must have a FICO credit score (Fair Isaac) of 540 or greater (sub prime). 600+ (near prime) and 680+ (prime lender). If you don't know your credit score you should get a copy of your credit report. Loan Amount A new or used auto loan is typically between $5,000 and $50,000 depending on the length of the auto loan period. If you need a car loan for less than $5000 it's wise to get a credit card instead of approaching a lender. Employment History Steady employment is preferable for an auto loan. If you're self-employed proof of two years minimum employment history must be provided with tax returns. Collateral Any vehicle that is offered is generally no more than seven model years old (as of January 1st of that year). Vehicle Type The lending process is compounded if the automobile is a sports car motorcycle collector vehicle hot rod or similar type car. Some lenders are also particular with other vehicles such as SUVs and trucks. State-by-State Some states have auto loan restrictions. As a result some lenders do not offer all services therein. Other Considerations * Complete all fields on the loan application accurately with proper format and no typos. * Be sure you work with the most trusted car loan lenders. Do your research by reading thorough reviews of only the most qualified companies. * Apply for a car loan online. It is secure and fast. The right loan can mean the difference between wasting money and saving money. Once you get started you'll be one step closer to your new carmore :
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