The Role Of Income In Auto Finance

A few years back, only the credit score of the applicants was necessary to decide whether the auto finance has to be approved or not and whether the interest charged should be high or low. But, with the introduction of special lending procedures, the applicants are getting easily approved for the financing. Moreover, more and more lenders are joining the competition which means that is getting more difficult to hold on to clients. But more importantly, it has become more difficult to judge whether the applicant can be approved of the auto finance or not.

Here, the income factor plays a major role in deciding what sort of interest should be charged and what should be the answer to the approval or rejection on the auto finance. If the income of the borrower is high, then the lender can safely assume that the money would be paid on time and the interest rate can be kept decent or even charged high because of the low credit score. But if the income is low, then the lender assumes that his installments would be difficult to make as the priority of auto finance installments is considered to be last after all the other basic necessities.

Some lenders keep restrictions or demands on the amount of money that their applicants should earn to get approved for auto finance. The usual standards claim that the borrower should be earning at least 4 to 6 times the amount that he/she is paying in installment. The number of multiplication can vary according to the size of the family as it is considered that people with children and spouse have to spend more on necessitates and products. However, the earning potential of the family is also increased which helps the family and the lender to get the auto finance easily.

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