Applying for a car loan

Many people consider applying for a loan to be applying for seemingly endless days of worry. This however, isn’t so if one takes some time off to plan carefully.

A car loan is something that the majority of banks offer their customers in order for them to be in a position to buy their dream car. As per usual agreements, the borrower agrees to pay the lender the borrowed amount along with a certain interest. The security in this case is the car which would be possessed by the lender if the borrower fails to pay the borrowed amount in full. So what exactly do banks look for in a person before authorizing a car loan? Surely no one can judge anything solely based on an application. The present article discusses on this question.

Capital

Everything starts with money. The bank will invest in you if you are worth something. This is the same as the case when you would invest in a company that is reputed and having credentials of having good performing assets to its name. The more you are worth, the better are your chances of inking a good deal with the bank. Capital is increased by saving more cash, investing in Government Bonds or other investments with a good return. These measures ensure enough liquidity even in the case of debt.

Capacity

Banks look into the applicant’s capacity to stay loyal to the various agreements in the car loan with the bank and at the same time meet other expenses. The banker is not foolhardy to think that a person would sacrifice personal interests and responsibilities for paying back the loaned amount. Some of the indicators of capacity are sources of income such as a job or investment that gives a steady income to the applicant. The banker also looks into other debts that the applicant may have and what portion of the income goes to repaying such debts.

Credit history

One of the most important yardsticks of measuring one’s credit worthiness is the person’s history of dealing with credits. The bank asks questions that pertain to the history of the applicant’s dealing with various lenders. This therefore requires complete cooperation from the side of the applicant who will have to furnish details of previous dealings with complete honesty. Any attempt to present forged or dishonest documents might end up with banks blacklisting the applicant and they would never issue a loan to the latter again.

Credit history can be improved by taking up small short term loans and being prompt with them. If you don’t have a credit history in the first place, then you could show the bank bills such as electricity, telephone and the like that have a “due date” against them. Credit cards too are valid statements for credit worthiness.

Car

The type of car that you are going to purchase is a major factor in determining what kind of car loan deal you will be granted. Generally speaking, the loans are better for those who are planning to buy a new car. This would mean a greater principal amount, lower interest rates and better installment periods.

If you are still averse to getting a car loan against your name, you could try for car leasing. However, it is advised to lease vehicles from reputed authorized dealers rather than private dealers.  

And in case you don't find the car loan as a suitable option for yourself and would like to purchase a car instead, I recommend you to search for car sales online (or "find bilsalg" as the Danish say). If you would like to save some time you can follow this link for offers directly from Toyota.