A car loan can be taken out from banks and private lenders. They are also known as auto loans. Qualifying for a car loan is a bit different from personal loans, although these loans also do not require you to put down any additional assets as collateral. Your lender will have the upper hand, meaning you are free to use your car the way you want, but you will not be given a free hand to sell your car unless you pay off the debt.
There are various direct lenders out there promoting car loans as guaranteed car loans. Is it true? Can you actually get guaranteed approval on your car loan? Or is it just a marketing tactic to lure customers into filling in the application form?
100% guaranteed approval does not exist
100% guaranteed car loans do not exist. This is a sheer lie if a lender suggests that they can guarantee approval on your car loan application. No lender can guarantee approval without a credit check and your repaying capacity.
When you apply for a car loan, there are a lot of formalities required. First off, you will have to put down an upfront payment. It will be at least 10% of the market value of your car. Then your lender will peruse your credit report and income statement to ensure your repaying capacity. If your lender is not satisfied with your income sources, they might seek a bigger down payment.
If your credit rating gets in your way, you will need to put down at least 20% of the value of your car. Interest rates will be high. Unless a though check is made, no lender can guarantee that you will get approval on your car loan.
Sometimes a lender can turn you down despite a good credit score as you do not meet the eligibility criteria they have set for their car loans. No lender can approve your application without checking your affordability. If it is seen that you cannot afford to pay back the debt, you will not get the nod even if your credit rating is good and you have a larger deposit size.
So, if you have found any lender claiming 100% guaranteed approval, they are unethical and will not be registered at all. You should beware of such lenders.
Tips to improve the approval rate
Some lenders might advertise their loans as guaranteed car loans, but it does not mean that you will get the nod 100%. It implies that you have a chance of getting these loans at a faster rate of approval. Here are some of the tips you should follow in order to get a car loan approved at a faster rate.
1. Provide a deposit – a higher deposit
It is not possible to have a lender give you the green light on your car loan without a down payment, so you should try to put down a bigger upfront payment. If you are looking to take out bad credit car loans from a direct lender, it is mandatory to have a bigger deposit size.
But you should go with a higher deposit even if your credit score is up to scratch. When the size of loan-to-value is low, a lender is more likely to approve your application. Though 10% is more than enough, you should always try to make it to 20%, even if your credit score is good.
2. Improve your income
Just a good credit report is not sufficed to qualify for the best car loan deal. Despite a bigger deposit, you can be turned down when a lender suspects that your repaying capacity is not good. Though a lender can repossess our car to get their money back when you make a default, no lender would actually want to get into that hassle.
If you do not seem to afford your car loan to pay back on time, you will naturally be declined. In order to avoid this kind of problem, you should work upon improving your income sources. With a strong income source, you can increase your chances of getting the nod.
3. Reduce your debt
The debt you already owe can be one of the reasons for calling your credibility into question. A lender will assess whether your budget has a scope for car loan payments apart from other expenses.
If you have some debts, you might fail to prove your affordability. Therefore, aims at reducing the size of debt. If possible, you should get rid of your debt for at least 1 year before applying for your car loan.
Build an emergency cushion so you do not have to run loans for bad credit with 100% approval every now and then. Small emergency loans carry very high-interest rates. They can throw you into an endless cycle of debt.
Instead, you should use credit cards provided you settle your balance within the grace period. This is how you can avoid paying interest.
4. Use a guarantor
If your poor credit score is getting in your way, you should use a guarantor who can be anyone – either your family member or your friend. However, they must have a stellar credit file. When a third party enters into an agreement taking up the liability to settle the debt when you make a default, it lowers the risk of a lender. As a result, you can get a loan with a higher possibility.
To wrap up
A 100% guaranteed car loan does not exist at all. This is because a lender must examine your credit report, income statement, and the size of your deposit. However, you can increase your chances of getting the nod by increasing the size of your down payment, strengthening your income sources and reducing your debt.
This is possible even if your credit report is not impressive. You should arrange a guarantor. As this reduces the risk of a lender, you are likely to get approval easily.
Emma Anderson is a financial advisor at Quickloanslender who always believes in researching hard to know her clients’ financial problems. She takes the time to understand their financial wants and needs to write the blogs on them as the solutions. In her long 14 years of experience, she has written plenty of blogs on the financial and business sectors of the UK.
Emma Anderson has been recognised for her work in financial planning and her blogs are regularly published in the website of Quickloanslender. As far as her educational qualification is concerned, she has done Masters in Accounting and Finance, and done PG Diploma in Creative Writing.
