A lot of people think that by them having a huge income, they’ll automatically be approved of a car loan. That is not the case, however. Even though income is a big factor, it’s not the only factor banks and other financial institutions look at in car loan approval. In this article, we will be giving the best tips in order for your car loan approval to be smooth and stress-free.
We’ll factor in different metrics and things that these institutions weigh in approving car loans. Other than that, we’ll also help you manage how your car loan will be in the event that you get OK-ed by banks and other institutions.
Car loan approval and management tips
There actually isn’t a lot to think about here, however, if you’re just starting in the working class, you might want to build it up immediately so you already reduce the chances of you not being approved in the first place.
Settle and improve your credit history
If you’re just starting your credit score, it’s better to scrape it off to a clean slate. Having unsettled credit or debts will drastically affect how your car loan approval will be. Which is why it’s always recommendable to have zero to no debt if you’re looking to apply for a car loan. Having a good and clean credit history is always what people bank on when applying for loans. Even if you’re income is lucrative, if your credit score is bad, it’s still not a guarantee that you’ll get approved.
Assess your current financial standing
You don’t want to buy a car out of impulse or habit. Paying it off is not easy even though you think it is. Before actually applying for one, try and look at the main factors of your finances: your income, your debt-to-income ratio, and your credit status. Evaluate how much you earn on a monthly basis, how much is left after paying off all of your responsibilities, and how your credit score is looking. If you see that it’s not going to be difficult for you, then go and have a look at your credit score. But if you check and see that what you’re earning is not enough, then you might have to find and generate another stream of income to help you with your savings and finances.
Be in the same job for at least a year and a half
There are banks who are attracted to applicants who are employed in the same job for at least two (2) years. While there are banks and officers who just require the applicant to be a regular employee. Either way, try to be on the same job for at least a year and a half not just for the sake of car loan approval, but also in order for you to properly gauge whether or not your salary is enough in paying that car loan off. Also, being in the same job for a year and a half would psychologically convince you to stay longer on the job so, it’s a win-win for you.
Avoid stacking of debts
It’s normal to have debts. What is not normal is when you just don’t run out of debts to pay for. For your peace of mind, it’s always important to avoid getting new debts every time your old debt gets fully paid. A good and diligent officer will always look at what legal debts you’re getting and can actually question you upon your car loan. So, to be safe, just try to avoid new debts upon the application of your car loan.
If you’re planning to get a new car through a car loan, it’s best to practice limiting yourself to what you’re only allowed to spend on. This is also a good way of adjusting how you budget when you’re already paying off your car.
Be truthful with your finances
A lot of people fake their income and their capacity to pay just for a car loan approval. However, in the end, it’s them who suffer. Since they made a way and had a workaround just to get approved, the time comes when they’re not in a good shape to pay which costs them both the car and what they’ve already paid for. So, to be in good standing and to know whether or not you’re good at paying for a car, just be honest with how much you can pay for each month.
Manage and budget your costs each month
Although it’s common for some people, budgeting is actually a good tool if you’re going to add costs in your life. Budgeting can really help especially if you’re saving up for something big. A difference of around Php1, 000.00 each month is a big thing to some people but a small thing to some. So, budgeting can actually direct that extra Php1, 000.00 to something much more important and to something better.
There are a lot of budgeting and money-management tips you can try to study and find. You can compare them and see what best fits your current financial standing, your income figure, your lifestyle, and of course, your overall financial habit. The following are few of the best examples of these:
Getting a car loan approval is not really rocket science. As a matter of fact, ensuring of you being approved is a matter of discipline, being a good employee, and being a good payer of debts. There’s nothing really special for your car loan to be a success. Also, it’s in this where you’ll see that getting a high-paying income does not guarantee an OK from banks or financial institutions; that’s not always the case.
The answer? Have a stable income, ensure a good or even best credit score, follow up on your finances and do well on your savings. Adding up another stream of income would also help and can actually be a good ingredient in your car loan application.
So these tips are not actually life-changers; as a matter of fact, these are basic things that most people just forget that are relevant. Most people just need to bear in mind that paying off debt is not a burden. Although it’s something that you’re constantly thinking about, it’s actually big help to everyone. Imagine owning something that’s worth hundreds of thousands of pesos, paying it at a staggard amount? It’s a total benefit and it’s definitely a big relief.
We do hope that you’ve picked up lessons and ideas from this guide. We sure wish you good luck and good financial management in your car loan.