In the times of ever expanding world and fast moving lives, traveling with comfort has become a major necessity for everyone. Today, everybody wants to reach his destination on time and in style. Maybe that’s why a car has become a commodity that one must possess. Thanks to the developed financing environment in the country, buying a car is not difficult. With the help of down payment, you can have your dream car in your garage.
Buying a car on loan majorly involves two stages i.e. the down payment and the monthly payments. Down payment is provided to the dealer right before purchasing the car. On the other hand, a car buyer has to make monthly payments to the lender.
Down payment is useful for the dealer as well as the car buyer. It acts as security for dealer and helps the car buyer in reducing the debt burden.
Deciding the Down Payment Amount
Deciding the down payment amount might seem a tedious job but actually the factors governing the same are easy to understand and calculate. The lender considers the following factors before approving the loan amount:
DTI (debt to income) Ratio
Debt Repayment History
If the lender considers you a less risky car buyer, he will approve you for a larger loan amount. It means you will be able to buy a car with a smaller down payment amount. Therefore maintaining a good credit score and a lower DTI ratio will encourage lenders to lend you more money.
What to do if the Loan Application is considered Weak by the Lender?
Do not worry if you do not have a good credit score or a strong DTI ratio. In such a situation, you will have to opt for a larger down payment amount. Here …