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How to Increase the Loan-to-Value Ratio on Your Auto Loan?

How to Increase the Loan-to-Value Ratio on Your Auto Loan?
"""Obtaining an auto loan equal to the vehicle's value can be challenging when purchasing a new vehicle. The purpose of applying for a loan is to alleviate the financial burden of purchasing a new vehicle. Therefore, it is optimal when the loan covers the maximum amount of your expenses. Therefore, auto loans with an impressive loan-to-value ratio are desired.

So, what is the loan-to-value ratio and how does it function?

Technically, a loan-to-value ratio represents the amount of the loan relative to the car's value. It is typically calculated by dividing the loan amount by the vehicle's current market value.

In a perfect scenario, the loan-to-value ratio falls below 100%. On a case-by-case basis, however, lenders can extend loans up to 150% of the car's value. Assume, for example, that you wish to purchase a $50,000 automobile and the loan-to-value ratio of your auto loan is 120%. It indicates that you have $10,000 left over for other expenses, while you can easily afford a new car.

A lower loan-to-value ratio reduces the lender's exposure to risk. However, there are a few ways to obtain a loan-to-value ratio that exceeds the value of the vehicle you wish to buy.

What should you remember to achieve a higher loan-to-value ratio?

A Spotless Credit Record

A spotless credit history is by far the most important factor in obtaining an auto loan as well as a higher loan-to-value ratio. Without a solid credit history, obtaining an auto loan can be challenging and may cost you a little more. In order to obtain a higher loan-to-value ratio, it is imperative to maintain a good credit history.

Type of Vehicle

Repayment options and loan-to-value ratios can vary significantly based on whether you are purchasing a new or used vehicle. Buying a new car has its advantages, as you are covered by a warranty for several years. Additionally, the loan-to-value ratio for used vehicles may not be absolute compared to that of new vehicles. Therefore, an auto loan for a newer vehicle can cover your entire loan, and in some cases even extend it to a greater amount than the cost of the vehicle you wish to purchase.

Constant Income

The primary qualification requirement for an auto loan is a stable income. A stable income demonstrates to any lender that you are capable of repaying the loan amount within the specified time frame. Typically, lenders require pay stubs or bank statements to verify income. With a steady income over the past few years, it is possible to obtain a higher loan-to-value ratio.

Taking the aforementioned points into account, you have a better understanding of how a loan-to-value percentage on an auto loan works and the factors you should consider in order to negotiate a higher loan amount. Before deciding on an auto loan, you should always conduct exhaustive research and carefully read the loan agreement."""

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"How to Increase the Loan-to-Value Ratio on Your Auto Loan?" was written by Mark under the Finance category. It has been read 118 times and generated 0 comments. The article was created on and updated on 14 January 2023.
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