Often
while purchasing a new car, obtaining an auto loan that is equal to the
value of your car can be tricky. The whole point of applying for an
auto loan is to ease the financial burden in acquiring your new car.
Therefore, it is best when the maximum amount of your cost is covered
through the auto loan. Therefore, any auto loan with an impressive
loan-to-value percentage is sought after.
So, what is Loan-To-Value Percentage and how does it work?
Technically,
a loan-to-value percentage is the amount of the loan financed, relative
to the value of the car. It is usually calculated by dividing the loan
amount by the current value of the vehicle.
Under
an ideal scenario, the loan-to-value percentage on all auto loans is
below 100%. However, on a situational basis, lenders can extend loans up
to 150% of the value of the car. For instance, assume you want to buy a
car worth $50,000 and the loan-to-value percentage on the auto loan is
120%. It indicates that you still have $10,000 to spend on other
expenses while you can easily cover the cost of your new car.
A
lower loan-to-value percentage on an auto loan means a lower risk for
the lender. However, there are a few ways to obtain a loan-to-value
percentage which is higher than the value of the car you want to
purchase.
What should you keep in mind to obtain a Higher Loan-To-Value Percentage?
A Clean Credit History
A squeaky clean credit history is by far the most essential factor in not only getting an auto loan,
but also getting higher loan-to-value percentage. Without a good credit
history, accessing an auto loan can be difficult and it might cost you a
tad bit more. Therefore, it is imperative to maintain a good credit
record as it is exceedingly important in acquiring a higher
loan-to-value percentage on your auto loan.
Type of Car
Whether
you are buying a new car or a used car, your repayment options and
loan-to-value percentage on auto loan can greatly vary. Surely, buying a
new car has its own set of benefits as you are backed by a warranty for
a few years. Additionally, the loan-to-value percentage on used cars
may not be absolute as against new cars. Therefore, an auto loan for a
newer car can cover your loan completely and in some cases even extend
it to an amount more than the cost of the car that you want to purchase.
Steady Income
The
primary criterion for qualifying for an auto loan includes a steady
income. For any lender, a steady income stands as proof that you are
capable of repaying the loan amount in the given time period. Usually,
lenders ask for payment stubs or bank statements to validate your
income. With a steady income of the past few years, obtaining a higher
loan-to-value percentage on your auto loan is possible.
Taking
the above points into consideration, you get a clearer picture on how a
loan-to-value percentage on an auto loan works and the factors you
should consider so that you can bargain for a higher amount on your auto
loan. Always carry out an extensive research and read the loan
agreement meticulously before you decide on choosing an auto loan.
You
can avoid down payment and reduce the chances of paying an upfront
amount to the dealer by opting for higher loan-to-value percentage on
your auto loan. Get in touch with Car Destination - A guaranteed auto financing expert and get approved for a higher loan amount instantly. Apply now; obtain a low rate car loan.
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