Auto loan consolidation is a hot topic as the credit market all but dries up and lenders begin to be extremely selective in their approval process. Understanding the requirements for an auto loan consolidation is critical to securing a new loan. Auto loan consolidation takes all of your current auto loans and rolls them into a single loan. This can decrease your monthly payments and potentially decrease the amount of interest you are paying on the borrowed money to begin with. However, getting approved for an auto loan consolidation is not easy and can take a period of a few weeks to a month before your loan will be approved by the lender. Understanding the approval requirements however can give you a leg up on the competition and greatly speed up the loan approval process.
A list of approval requirements are provided below for reference:
Good to Excellent Credit Score – Your credit score is most likely the first thing that a lender will look at when determining whether or not to approve your loan. The credit score is the fastest way to get an idea of the credit liability of a client and the client’s track record with other lenders. If your credit score is anything less than good (<650) begin to take steps to improve it now before applying for any auto loan consolidation services. Obtain a free credit report online and then address areas that need work. For example, if any reporting agencies are have you as past due on a payment this could negatively affect your overall credit score, even if you have paid the debt. If you notice any discrepancies with regards to past due notices, first follow up with the lender in question and then report the results of that inquiry to the reporting bureau.
Favorable credit with current lenders – In today’s market, no lender is going to approve a loan to an applicant with bad credit. Make sure you pay your bills on time and all of your information is as up to date as possible. Not only will potential lenders investigate your credit score, but they will call each of the lenders for the loans you are attempting to consolidate and ask them about your past track record. Be sure that they can honestly give a good report, call your lenders up and ask if there are any issues with your account prior to looking at consolidation loans.
Low debt to income ratio – As a final step, creditors will calculate your debt to income ratio based on the current loans you have and the payment on the new loan you would be taking on. Normally, they like to see this number to be at least lower than 40% of your income going to debt, however each creditor has their own requirements. Take steps ahead of time to try to lower your debt to income. One way of doing this is to have a downpayment available to pay part of the upfront costs of closing a consolidation loan.
Keep these points in mind when you are searching for a new consolidation loan and you will be sure to find a creditor willing to work with you.