This site was designed for the latest version of Chrome, Firefox, Safari, and Internet Explorer (version 10+). Some features may not work correctly in your browser. OK
Car Loans 101
No Image Selected
Qualifying for a car loan and the financing terms you may receive from a bank has several factors. Buying a car is one of the biggest financial decisions you will make, so the better you are informed to make smart decisions about your financial future the better off you will be. This article lists some of the considerations you should think about when applying for a car loan.

Credit Score​ 
Your credit score is one of the bigger considerations most lenders use to determine the amount of financial risk you represent. Banks do not want to lend money to someone who has shown a history of not paying the money back. And, if they do decide to lend you money then they are doing so at a higher risk, so they are going to want a higher reward, or return. Hence, you are going to have to pay a higher interest rate. A poor credit score isn’t necessarily a “No” from our lenders at Max Auto Sales, but it is true that the better your credit score on your credit report, the better the rate you are going to get. If you don’t know your credit score you can usually get a free credit score or credit report from one of the three credit reporting agencies: Equifax | Experian | TransUnion. At at Max Auto Sales, our lenders report to credit bureaus so paying your car loan with us in a timely manner will actually improve your credit score!

Debt to Income Ratio
Your debt-to-income ratio gives lenders an idea of whether or not you will feasibly be able to pay off your loan in a timely fashion. Max Auto Sales will help you do a budget worksheet to help both us and you understand how much of your regular income goes to existing debt and if you can afford to carry more debt, such as car loan.

Size of Down Payment​ 
Bigger down payments are better all the way around. The larger of a down payment you can make, the more favorable the terms you will be offered. So if you can afford it, you are better off putting down a larger down payment than a smaller one. It shows the lenders you are serious because you are also putting a lot of your own money into the deal. This shows commitment, and will help you get a lower interest rate.

Length of Loan​ 
Length of a car loan can be a double edged sword in terms of risk for the lender. The length of the loan indicates to lenders how long they have to put up with the risk. The shorter the length of the loan, the less risk they will take over time, but a lower rate and car note means you may be more easily able to afford the payments in tough times. Lenders have to figure out a good balance to get the loan paid off quickly, and still give the buyer more favorable terms. It will be in your favor if you can afford a larger monthly payment with a shorter term (length of the loan), and of course a large down payment can help offset that.

Age and Quality of the Vehicle​ 
The age and the quality of the vehicle affects the terms of loans as well. A better car will last longer. Lenders want to know that the car they are making a loan against will at least last as long as the repayment terms. At Max Auto Sales, we put our vehicles through a pre delivery inspection to do our best to make sure the car you are buying is in great condition. It’s no secret: we want our cars to last you as long as possible because it makes you a happier customer. And if a car has a major break down while the owner is still paying for it then it becomes very hard to pay for both a car note and a major repair. The chance of the loan being defaulted on is higher. While no one can predict the future, and not everyone maintains their car as well as they should once they buy it to prevent major breakdowns, generally speaking a used car in better shape when it is sold will maintain that good condition longer. Here is why this matters. In the event of a default, the lender can repossess the vehicle and have a higher chance of being able to offset losses from a payment default with a high quality vehicle.
- + Disclaimers