Big investments require equally large sums of capital. Whether it is a house or car, you will find it highly irresistible to seek loan facilities. For a vehicle, you will need an auto loan while for housing, mortgage companies are ready and willing to work with you. For land and other assets, normal investment loans are easily obtainable from most of the banking institutions.
Whether they are for business, family use or farm work, vehicles have become a necessity in recent times. Hardly can you transact or traverse without requiring services of an automobile in one way or another. You can choose to hire or own yours. One of the ways of acquiring a car is through borrowed money usually in the form of loan. Should you choose to go this way, you need to know what a financial institution wants from you as a prerequisite for loan money.
Collateral for an auto loan varies depending on the source of lending you choose. Several institutions that include banks, vehicle manufacturers and even more recently online financial institutions are offering lending services on different platforms. So, how do financial institutions gauge if you deserve lending or not?
Whether you are borrowing for a car or land, the prime condition for acquiring loan facilities will depend on your past responsibility in handling borrowed money for the period up to the date you are looking for the loan services. The institution will require previous lending and repayment trends and history. This is because a financial institution that lends is banking on your ability to repay their money promptly. For example, a past auto loan defaulter will find it difficult to obtain credit from any potential financier. In the financial realm, this is known as ‘verifying one’s credit worthiness’. If your credit score is high you qualify, if it is not the opposite is true.
Financial institution will also want to examine the extent debt you are into. If you have other existing debts, that you have not repaid, this could be a limiting factor to obtaining another loan. The type of loan you are already in could also play a role. For example some institutions will not allow more than one car loan at a time.
Your financial might require some physical collateral for loans. Some withhold ownership documents while others want evidence of ownership of other assets as cover in the event of failure to repay.
All in all your financial health and credit soundness will play the biggest role when it comes to acquiring an auto loan.