The majority of car loans are unsecured, i.e., no collateral is required, and there are several tips to help a purchaser nab such a financing plan. Well ahead of the car purchase, buyers should take steps to improve their credit score, especially focusing on building a solid credit history. Lowering the debt-to-income ratio makes a purchaser more attractive for an unsecured car loan. It also may be helpful to provide employment information. Buyers should consider applying for financing with a company they did business with previously.
When financing firms approve unsecured car loans, reviewers expect a reasonable certainty that the borrower will pay back the money on time. Lenders depend on a credit report because the profile paints a picture of the borrower’s credit habits. Before applying for an unsecured car loan, buyers should take steps to improve their credit score. Do not open unnecessary lines of credit, create a diverse credit portfolio and, above all, pay all bills on time in the months leading up to a car loan application. Those with recent delinquent bills must bring all accounts up to date and should consider delaying their application for the best chance at loan approval.
Automobile buyers also should order their credit report first. Peruse the information to check for mistakes and promptly file appeals on any misinformation. Doing so can correct credit report mistakes before they derail an unsecured car loan application.
Unsecured car loans will add a significant debt to a credit profile. People have a better chance of obtaining the loan if their debt-to-income ratio is lower. Pay down as much debt as possible before applying for an unsecured car loan. Start with so-called “bad debt,” such as credit cards with high interest rates, rather than “good debt,” including mortgages or education loans.
Maintaining gainful employment also makes unsecured car loan applicants more attractive to lenders. Full-time, steady employment tells financing companies that a car buyer is responsible and has access to money to repay the loan. Buyers should bring their employment and salary history with them to any meetings with financing officers.
Borrowers who previously have gotten loans through one lending firm should also consider applying there again for unsecured car loans. Other factors, such as credit history and debt-to-income ratios, matter more in loan applications. It cannot hurt, however, to highlight past positive experiences with the lending firm in question. The lender can easily look up borrower's payment history. This may make the finance company more likely to approve new unsecured car loans.