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Loans For Auto - How People Can Obtain Loans for Auto Purchases

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Next to their monthly mortgage or rent payments, most people’s second most significant monthly expenditure is their auto loan payment. While many banks have increased their restrictions and qualifying standards on all forms of lending, there are several ways a person could increase their chances of obtaining loans for auto purchases.

The first way to improve your chances of obtaining an auto financing loan is to take out a loan that is within your personal budget. Like mortgage lenders, auto loan lenders will review your personal income statement to determine whether they believe you will be able to make all of your auto loan payments going forward. As a general rule, the auto loan lender will want to ensure that all of your monthly debt payments including mortgage payments, student loan payments, credit card payments, and the potential auto loan payment will not exceed 36% of your monthly gross income. If they exceed this amount, you may not qualify for the auto loan, or you will have to pay a higher interest rate.

The second way to improve your chances of obtaining loans for auto purchases would be to improve your application qualifying factors. Auto loan lenders will base their approval decision on just a few qualifying factors, the main of which will be your credit history. While having a good credit history and score takes years to accomplish, there are ways that you could improve your credit score immediately, which may be enough for you to qualify for the loan or a better rate. To see an immediate improvement to your credit score, you could either pay off a previously charged off account or pay down a portion of your outstanding credit card balances. Also, similar to purchasing a home, banks prefer it if their auto loan borrowers put forth a down payment when purchasing a car. By putting forth a down payment of 30% or more, you could drastically improve your chances of obtaining auto loan financing.

The third way to improve your chances of an auto financing loan would be to consider multiple sources for auto loans and to shop around. While the first auto loan lender you apply with may not offer you a good rate, another auto loan lender may have a different underwriting process and may offer you a better rate. Also, many car dealerships also have financing departments that provide auto financing options to their customers. In many situations, the auto dealers will be able to give a person a better rate than the bank because the dealership is profiting significantly from the sale of the vehicle.

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