Raising money for your car loan may sound easy however there are certain factors on which your car loan approval depends. Let us take you through the top things that banks consider while processing your car loan application:
1. Good Credit Score
Your last loan’s repayment does matter when applying for a new car loan. Every bank before sanctioning your loan will check your credit score that is directly connected with your previous loans and their payments. To maintain a healthy credit score, pay your bills, EMIs on time and avoid being a bad debtor.
2. Loans Duration
The pending duration of your current loans also matters while applying for a new car loan. If you already have too many loans going under your name (that are not going to end anytime soon), then your car loan application may stand cancel.
3. Loan Inquiries
If you are raising loan money too often or have made multiple inquiries in the past, then chances of your loan rejection are high. Your credit score dips up to 5 Points every time a bank or financial institution checks it for loan processing, this is commonly known as a Hard Inquiry and negatively impacts your credit score.
4. Amount of Down Payment and Loan
If you want to borrow a big amount for a normal sedan car, it is simply not possible. Banks do not disburse more than 80-85% loan amount of the car price.
5. Loan Portfolio
There are two types of credits – good credits and bad credits. Good loans are the ones for which some asset is mortgaged like your home loan; and bad loans are those which are highly risky and carry no mortgage or collateral from the borrower, for example you personal loans or credit card dues. If you have more good loans than bad loans, you are secured otherwise your car loan application is in the risk zone.