When you apply for a used car loan, lenders will investigate your credit history to determine how much they are willing to give you and at what rate you will be charged interest. When they evaluate you, they look majorly at three factors – current debt, the length of your credit history and your payment history, according to U.S. News.
If you have a large amount of debt, auto lenders may be hesitant to add to it. Owing a lot of money can cause worry for the lender that you will not be able to handle another payment.
People who are just beginning to establish their credit may be seen as more of a risk to lenders because they have less evidence to determine the likelihood of payment behavior. The news source reports that if you are just starting to build your credit, you can ask a family member to co-sign a loan.
Potential lenders also want to know if you will make your loan payments in a timely manner, so they look at your past payments on student loans, mortgages, credit cards and personal loans.