Thinking about buying a new or used car? There is no time like now to figure out how much vehicle you can qualify for in auto financing. It is really a much simpler process than many people think, as they may picture difficult negotiations over terms or details in a small back office at the car lot, but in reality, auto loans are simpler than ever, and most people can be approved in just minutes!
One great way to begin the process of getting approved now for an auto loan is to talk to someone at your bank or credit union, or even the financing experts at your local car dealer, who can help you figure out what you qualify for in auto loans, and how to get started on the road to driving away in your dream car. Basically, the financial people will want to know how much you earn monthly, which they will divide by your total monthly bills and payments (mortgage or rent, student loan or consumer debt), to come up with a sum called your “back-end ratio” or just “back ratio”. This is one tool that financing experts use to assess your credit worthiness — whether your income and assets add up to enough to ensure the creditor that you have the ability to pay them back.
Since the car title itself is usually the security for the loan, you don’t usually need collateral, (which is, in most loans, simply more security for the creditor that they will be repaid, whether by you making payments, or, if necessary, by selling the collateral to recover the money). And since the terms of auto loans are usually fairly short (from 12 months to 36 months are not uncommon loan terms), compared to home mortgages, for example, the terms and conditions are usually much more favorable to the buyer, with much less complication to work through, as opposed to the process of financing a house.