Requirements to get an auto loan from bank?
by Author on Thursday, July 22nd, 2010 | 2 Comments
I want to buy a car from private party what are the requirements for a 15,000 loan?
credit score?
what are the best places to apply?
for how long should I make the loan so i have affordable payments?
Best Interest rate I can get for a poor-fair credit score?
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A bank will use many factors to determine whether or not to extend a loan to you. Credit Score does have an influence on your "credit tier" and what type of interest rate you will have, but there are additional factors that will influence their decision.
Banks will look at your current income (Most have a min. requirement of $1500 – $2000 per month). They will look at your length of employment, as well as how long you’ve lived at your current address. (They want to know your stable, and not going anywhere.
Banks will also look directly at your past history with "installment loans". Installment loans are different then credit cards which are considered "revolving credit". An installment loan is a specific amount of credit that you pay down over time, like a car loan or mortgage.
I have seen people miss credit card payments multiple times, but never miss an auto loan or house payment and have no problems getting approved. On the other hand I have seen people with perfect histories on credit cards unable to get financing without cash down because they have never had a car loan in the past.
If you have never had a car loan or mortgage, you should consider looking for a co-signer or plan on putting a couple thousand dollars down. If you are a recent college grad, or will be graduating soon, many banks offer "First Time Buyer & College Grad" programs. A quick search for those keywords on google should help you if that applies.
If you plan on keeping the car a long time, a 60 month (5 year) loan would probably work best. Depending on the vehicles age and mileage, 72 months may be available. However, keep in mind that the longer the term of the loan, the higher the interest rate will be and you will be paying that interest longer.
As an example, my Americredit book the rate would be around 17% for someone with fair or below fair credit rating. (Figure 580-620ish approx.) That’s just one bank of course and your mileage may vary.
Something to keep in mind is that you can always get a loan, make steady payments and then refinance it at a lower rate down the road. Also as you make payments and build credit, your next auto loan will be signifigantly lower.
credit score is a must.
You can apply in credit unions rather than banks, they are easier to get than banks.
6 years is the standard and best term. interest rate depends on how bad your score is.