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What Auto Lenders Look for While Offering you Car Financing?

Auto loans are a necessity for everyone because cars have become very expensive. Everyone is apprehensive about car loan approval because most of us don’t know what factors are considered by auto lenders. Once you know them, you will be more confident in getting a low rate car loan.

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We often commit a mistake when we consider credit score as the sole important requirement for getting instant approval on low rate car financing. But, the reality is different. Credit history is just one factor and there are many others factors which are equally important. Let’s understand what really constitutes your car loan approval criteria.

Down payment Capacity

Cars are a depreciating asset and that’s why; getting a car loan with 100% LTV is difficult. Even if a lender approves 100% car financing, it is not a wise idea because it significantly increases the chances of an upside down auto loan.

When the lender pays only part of the car cost, the rest comes from down payment. Down payment is the initial upfront amount that you pay to the dealer for buying a car. When you put a substantial amount as money down, lenders know about your financial capacity.

Larger the amount of money down, larger will be the lender’s confidence in you. The reason is simple. A huge down payment ensures that you are financially capable of making regular payments.

Repayment Capability

Lenders are interested in knowing about your repayment capacity. As they are making an investment, they want to ensure that they have taken a correct decision.

Before offering guaranteed low rates on car loans, lenders make sure that you have enough resources to make regular payments. Generally, auto lenders check employment status, salary, employment period and ascertain the monthly payments that the borrower can afford. If you are a self employed individual, you will have to provide details about your income source and tax information to the lender.


Although the car that you buy is used as collateral by the lender, we all know that the value of car depreciates over time. Now, lenders have a solution for this. They often ask for additional security. You can use your home or any other vehicle like a car or a boat as collateral.

Additional collateral lowers the rate of interest and offers other borrower-friendly advantages like longer repayment period and lower monthly payments.

Credit Score

Before approving your car loans, auto lenders check your credit score. It lets them understand your past credit behavior.

Late payments, defaults, arrears on past loans make your credit score bad. If you have a poor credit score, lenders may offer high rates. But, here’s a strategy to lower the credit risk associated with you. You can opt for a higher down payment amount or go for a co-signer. When lenders see a co-signer with a good credit score, they are assured of their investment.

Even though lenders have different approval criteria, these factors are important for every lender. Remember that you must lower the lender’s risk if you want to get guaranteed approval auto financing in an instant.

All the best for buying a car! is a premier online auto financing company that offers guaranteed low rates on auto loans. You can instantly avail car loans for buying a new car or a used car from us. Apply now and get 100% free car loan quotes!


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