Car Loan Underwriting: Everything You Need to Know
Car Loan Underwriting: Everything You Need to Know
Posted on January 11, 2023
The majority of Canadians who drive, have a car loan but most of us do not know what car loan underwriting in Beamsville is, we just make the monthly payments and go on with our life.
Our Beamsville auto loans team are going to take a deeper dive to learn about car loan underwriting in Beamsville and how to make the most of these opportunities.
It is a numbers game
When dealing with any type of sales, the cliche is “it’s just a numbers game” but with car loans in Beamsville, it truly is a numbers game. The first number that all lenders look at is your credit score.
Lenders want to know whether you are likely to repay your loan as agreed.
No one can predict the future but lenders are playing the law of averages which gives them a degree of predictability.
If you give loans to people who are responsible then the odds of them repaying the loans are greater than if you gave out loans to borrowers with bad credit.
How is good credit classified?
The current credit score needed for all under the “good credit” classification is 680 but that requirement is constantly changing.
Prior to the onset of the pandemic, there were lenders that were giving out prime interest rate car loans to borrowers with a 650 credit score but Covid-19 has wreaked havoc on the law of averages.
Seeing beyond the credit score
The credit score is important but any auto loan underwriter who is serious about their job will also verify the prospective borrower’s income.
Everyone can remember back in 2008 when the subprime mortgage market in the U.S. imploded due to bad loans given to borrowers who didn’t have the income necessary to repay the loans.
No underwriter wants to lose his/her job by issuing bad loans, so they are exercising a greater degree of caution.
Auto loan providers have to hit specific sales goals
Now that you have a brief understanding of what auto loan underwriters are looking for, you need to understand that they must hit certain sales objectives to keep their jobs and stay in business.
Interest rates are low and the competition for customers is fierce, so these lenders are getting creative and trying to grow their market share by working with local car dealerships.
These lenders are offering local car dealerships preferential interest rates in the hopes of getting more customers.
Car dealerships know that most of their customers will need financing in order to buy a new car and having competitive rates will give that dealership a competitive advantage.
The only way you can benefit from these ultra-low interest rates is by going to your local car dealership. To get the best possible terms on a new car loan, you should make sure your credit score is over 680.
If you are having credit challenges or not sure how to boost your score, the local car dealership has in-house credit experts that will show you how to get your score over 680.
If you need help or advice on anything to do with auto loans in Beamsville, contact Car Nation Canada today, we can help!