Car Loans Lending Criteria in Canada

by admin on April 2, 2014

Bank customers are offered financing for the purchase of motor homes, sports vehicles, cars, campers, and RVs. Secured loans come with a lower interest rate because financial institutions take less risk. Check for credit insurance, prepayment penalties, and other hidden fees and charges. An unsecured auto loan is another option gearswhereby collateral is not required. The terms vary depending on your credit score and type of vehicle, e.g. car, ATV, snowmobile, jet ski, etc. Generally, your credit rating is the most important factor for banks. If your credit score is in the 500 range, your interest rate can be as high as 18 – 20 percent. Depending on your credit score, you may need a cosigner. A family member, parent, or friend is your first choice if you apply together with a cosigner. Car loans are offered for the purchase of new and used vehicles. There are different options for customers, including leasing and buying a vehicle. Another option is to apply for a loan through a car dealership, but the interest rate is usually higher compared to banks and credit unions.A down payment is usually required if you plan to finance an expensive item such as a vehicle or another asset. Financial institutions take less risk when borrowers offer a large down payment. When it comes to the term or loan period, there are different options available. Borrowers who opt for a longer repayment term benefit from affordable monthly payments, but they pay more in interest in the long term, which increases the cost of borrowing. If you are self-employed, you may have to present your individual income tax returns and other documents. The interest rate also varies depending on the repayment term, i.e. 36 months, 48 months, 60 months, etc. The borrowing limit is also an important factor. Make sure you bring the required supporting documentation with you. The main goal is to check whether you are a risky borrower.

There are different lenders to choose from, including online banks and brick-and-mortar lenders. Your lender will run a credit check to assess your creditworthiness. Some financial institutions offer online calculators to compare different loans. Enter the start date, term, interest rate, and any extra payments. Some online tools also allow customers to calculate the amortization schedule, which makes budgeting easier. You may want to calculate the payment on simple interest and pre-computed loans.

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