How do car lenders check your income?
I'm applying for a car loan through Bank of America, and I'm wondering what the process is to see if I can get the loan. How do they make the calculations that I can afford it based on your income?
“Lenders have a number of ways to ensure that you’re financially ready for a loan.
First, they will likely check your credit score. If you have excellent credit, they may not need to see your income verification to ensure that you can pay back the loan, but some lenders will ask, anyway.
In addition to obtaining your credit score, income documentation, and the price of the vehicle you’re looking to get a loan for, a lender might calculate what’s known as a debt to income ratio. The lender will calculate this ratio by taking your bills every month and divide that using your income before tax. If the ratio seems too high, they might ask for further income documentation to ensure you can afford the loan.
Make sure to shop around for rates to ensure you’re getting the best car loan rates. Getting preapproval from a bank is helpful for negotiating at a dealer to help you secure the best deal.
Also remember that you will need car insurance for your new car. Insuring a financed vehicle is often more expensive that insuring a used vehicle, but it doesn’t have to destroy your budget. Use the free Jerry app to compare rates with the top providers and get the best deals delivered to your phone in minutes.”
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