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Sep 01, 2011 (6:44 pm)
I have a question about financing.
I am planning to purchase a vehicle. My credit score is 738 (EXPERIAN) but I have CC debt about 40% of my available balance and income to debt ratio is about 24%.
I have obtained car loans previsouly, paid off two full term loans in last 10 years.
I am little worried that my debt might be a problem for me to obtain financing or get a horrible APR rate%.
Would it be better to try to get financed by a car dealer or through a bank?
Which lender would be easier/more favorable to obtain a loan with good interest rate?
I am thinking about applying through one of major banks such as b of a or chase and see what they offer but I dont want them to do a hard inquiry and hurt my credit rating.
Any advise would be greatly appreciated.
#996 of 1033 Re: Financing [superman5]
Sep 02, 2011 (5:28 am)
Well, they will have to do a "hard inquiry" to approve you. The dealer should be able to get you a decent rate, but I would want to have my own approval as a back up and to make sure you get the best rate. Keep in mind:
"There is logic built within the FICO credit scoring system that treats multiple mortgage and auto inquiries as one search for credit (a.k.a. only one hard inquiry).
The goal of this logic is to prevent consumers from being penalized for being aggressive interest rate shoppers and only count the fact that they’re looking for one loan against them. The alternative is to have their scores negatively impacted for each and every individual inquiry.
Some of the versions of the FICO scoring credit-scoring models group inquiries into 14-day increments while others group them into 45-day increments. However, since you don’t know which version of the score you’re being scored with, it's best to do all of your shopping within a 14-day window."
#997 of 1033 Re: Credit denied after taken possession [Mr_Shiftright]
Sep 06, 2011 (10:05 am)
Well in most cases, that's still the cheapest way to buy a car, especially since putting your car money into a savings account isn't very fruitful these days.
I totally agree, but that wasn't the OP's original choice. If he had wanted to pay cash, he would've paid cash from the start.
#998 of 1033 Auto Loan advice requested
Sep 27, 2011 (11:15 am)
I have a credit score in excess of 725 but was surprised to know that Capital One Auto Finance rejected my loan application of $35000. I do understand that credit score is not the only factor for giving out a loan. I never have financed anything big in my life but have a steady job as Electrical Engineer for the past 4 years after getting out of school. Anyways, now I want to look into other options. I want to know about some of the sources that can pre-approve me for a loan of $35K. I have read about websites such as myautoloan.com but not sure if these are legal sites and am worried about losing my personal information. Are there any auto-loan sources that you can recommend so that I do not have to deal with the dealer financing? Please advise.
#999 of 1033 Re: Auto Loan advice requested [joe350]
Sep 27, 2011 (1:19 pm)
Did you find out why you were rejected? Did you try your bank or credit union? can you put additional cash toward the purchase of the car and lower the loan amount? Why not the dealer?
Here's the section on auto loans from Edmunds: http://www.edmunds.com/car-loan/
If you got rejected by Capital One, my fear is you are heading toward a car loan with a high interest rate. Not sure an online auto loan broker is the way to go.
#1000 of 1033 Re: Auto Loan advice requested [dtownfb]
Sep 27, 2011 (1:44 pm)
Agreed. You need to find out why the loan app was rejected. My guess would be your debt-to-income ratio or you have a high amount of unused credit (empty credit cards with high credit limits).
My wife was rejected when she applied for a $21K auto loan last week. Our guess is because some things like our mortgage are in both names (though I pay it) as she has minimal debt otherwise. My income is close to 3x hers but she has a higher credit rating (by 10 points; both are comfortably above 750). Still, when we changed the loan app to joint it was approved.
Your credit score is a factor but nowadays the banks and finance companies are taking a closer look at your overall financial picture. And, to be honest, sometimes the factors they use to decide on creditworthiness aren't reasonable.
Also, the credit card thing. If you have a lot of available credit you're basically screwed. They won't give you a loan because there's risk of you racking up other debt & not being able to pay it. But, if you cancelled the high availability credit card to eliminate the risk your credit score is dinged as your available credit-to-debt ratio just got worse. You literally can't win, at least short term.
#1001 of 1033 Re: Auto Loan advice requested [fushigi]
Sep 27, 2011 (2:37 pm)
Thanks a lot for your time and advice. It was very helpful.
#1002 of 1033 Re: Auto Loan advice requested [dtownfb]
Sep 27, 2011 (2:39 pm)
Thanks very much.
#1003 of 1033 Re: Auto Loan advice requested [joe350]
Sep 27, 2011 (4:27 pm)
you're welcome. My last auto loan, June 2009, for my 2006 Camry was through my credit union. Everything was done online and approval was within 2 mnutes. Nice thing about that is payment is done electronically through your account.
A financial institution that knows you is your best bet, if you don't want to deal with the dealership.
#1004 of 1033 Re: Auto Loan advice requested [joe350]
Sep 27, 2011 (9:25 pm)
Well there's a few factors that go into a lender's decision...
1) Score. It's not the score itself. I have seen people who were barely 600s that got tier 1+ rates (Rare, but it can happen with generally very wealthy clients with lots of accounts) and I have seen 700+s that need cosigners.
It's not at all uncommon for us to see a college student with a 700+ based on 3 small limit credit cards. I've also seen people who were 800+s with recent 30 and 60 day lates bringing them down 100 points, this scares lenders.
2) The collateral. Few banks will loan money on a car older than an 03 or an 04, or with more than, say, 80k miles.
3) Your debt to income ratio. If you make $50k a year and have $2k down, good luck buying that new BMW 7 series even if you are an 800.
4) Equity. We recently had a customer who was in the high 700s who we couldn't get approved. Why? $7500 negative equity in their trade-in and $1500 down on a new Elantra GLS. No bank is going to loan $50,000 on a $30,000 car, no matter how good your credit is.
And there's other red flags, like an application that seems "odd" like someone who has always leased cheap cars suddenly looking to buy a new Escalade, or someone from Texas looking to buy a car in Ohio, etc.