If I was asked what most of the conversations I have had with consumers at AutoCreditFinancial started out with, one phrase starts almost every credit interview… Can you approve me for a car loan with (fill in almost any blank here and it’s been asked). While every circumstance is in itself unique, the best way for me to address it is to look at the basic qualifications for the extra analysis that the financial institutions impose on a challenged car loan application.
In our AutoCreditFinancial.ca network we have connections with Canadian Chartered Banks, regional and provincial credit unions, finance companies, buy here pay here dealers and private lenders.
Here is a Summary of major stipulations and factors underwriters consider when you apply for any car loan:
CREDIT SCORE (FICO OR BEACON FROM EQUIFAX OR TRANSUNION)
Your credit score shows up on the top of the lenders computer when they pull your credit bureau and usually gives a first impression to the human on the other side of what they may expect when they look at it. Your credit score is like a bowling score not a golf score. The higher the number the better. The number on the credit score doesn’t guarantee you an approval, however a score below a lenders threshold can get your application declined. This is why it is important for a professional like at AutoCreditFinancial.ca to direct your application to a lender that will look past this number if there have been or are current problems keeping it below their threshold Beacon Score From Equifax.
INCOME AND INCOME RATIOS
Many lenders bring minimum income requirements to the table and again this threshold must be met for the application to get looked at. However what a lender is looking for is your capacity to get a car loan and have the money to pay it. They are looking to answer where the money will come back to pay them back for the loan and taking on the risk. Lenders minimums start at $1250 with most around the $1700 range. However Regional Income Guidelines are Common with the Banks as parts of Canada have higher living expenses.
TOTAL DEBT SERVICING RATIO (TDSR)
To calculate your TDSR take all your monthly credit obligations, including the car payment you are seeking, and divide it by your gross income (before taxes pre-tax income).The target the lenders are looking for is usually in the 40-50% range with some making the exception up to 67% or two thirds of gross income.
PAYMENT TO INCOME RATIO (PTI)
This is an important ratio to most lenders. Lenders offering 100% Approval usually rely most heavily on this ratio as car payments are usually the highest of priority above other credit obligations as the car gets you to and from your work place. Target for a payment no more then 15% of your income while most lenders look to cap out around 20% on the high end.
STABILITY AND CHARACTER
Most lenders want to see how long you have been at your residence and job to determine how stable your application will be. If you frequently move provinces you may find that regional lenders may not want to deal with your application as their collateral may not be accessible in the event you do not pay. Knowing you have been at your job for 10 years improves your application in how consistent the income is from your job. Lenders may also look for you to be passed the probationary period (3 months in Ontario, 6 months Alberta) while some only require only a job offer as a basic requirement.
LOAN TO ASSET VALUE (LTAV)
Usually only the lenders and dealers can accurately calculate the actual Loan to Asset Value of your purchase value. Some lenders use a booking chart based on year and kilometres while others use the Actual Canadian Black Book KM Adjusted formula. Regardless of the number used in the calculations lenders like to lend only on a percentage about the wholesale value of the Vehicle. You arrive at this number by dividing the selling price and the wholesale black book value of the vehicle. Target is 120% of wholesale or below, while some stretch as high as 150%. On “Guaranteed 100% Approved Financing” on Vehicles the ratio may be below 100% to ensure the lender can get the full asset value if they need to reclaim the vehicle collateral. Most will permit a higher LTAV amount if you choose to include a service contract, extended warranty or guaranteed asset protection (GAP insurance).
Many people ask what the minimum downpayment is. While some lenders ask for a specific commitment level from the customer, the most common need for a down payment is to change into a favourable rating the income or LTAV ratios.
THE NO GO AREAS FOR MOST (BUT NOT ALL) LENDERS
This is the most common call I get. A scenario where someone has been denied credit instantly and has lost their home. These are called system declines most often as a computer can read that the underwriter will see something that is an automatic decline. These are different by each credit provider. I have listed some below. These are not rejections for all lenders, they are system declines for some lenders:
- Currently in credit counselling (or Less Then 6 Payments in)
- Government or Small Claims Judgements
- Double/Doubles (Not the Coffee) Refers to Multiple Bankruptcies or Declines
- Past due child support (Family Responsibility in Ontario
- Unfinished Bankruptcy
Most car dealers, finance managers and lending institutions discard these applications far too easily. AutoCreditFinancial.ca has taken many of these same scenarios and turned them into approvals. That is why the approach taken to focus on the individual strengths of the applicant is the philosophy we use in getting the highest ratio approved in Canada.
HERE IS WHAT A SATISFIED CLIENT HAD TO SAY
“I have graduated from Ryerson University recently, and after getting my new job I was excited to enter the working world. Thinking it may be the right time to get a car, I walked in to a dealership trying to buy a new vehicle. I was only informed then due to my limited credit history I couldn’t get a loan from them regardless how much interest I paid. Disappointed I had to take the bus to work every morning which made my day extremely difficult. I was so relieved when I got the news from AutoCreditFinancial, now I can finally have a car I need!”
Yours Truly – Rod M
Check out how easy the credit application is now to understand and APPLY NOW. You have a high possibility to be approved in just 2 hours.