Since the early 90's
banks and finance companies participating
in sub prime auto loans have relied heavily
on a computer generated scoring system to
determine the risk factor of a loan. In
short, the higher the score the lower
the interest rate. This program was
implemented primarily to reduce the amount
of loans in default due to non-payment.
In their efforts to take some of the decision
making away from their loan officers they
created what is known today as your Beacon
score.
To eliminate the bad
judgment factor they usually automatically
declined applications that had too low of
a Beacon score. This system proved to be
adequate in reducing the amount of bad loans.
However, over a period of time it became
obvious that even though they had fewer
loans in default, they weren't lending out
enough money to stay in business.
The solution was simple:
Redirect the decision making process
to those most qualified.
This brings us to the
point. Before a decision can be made on
a loan, as a matter of policy they must
verify your income and conduct a five minute
interview with you, the buyer. In most cases
the approval will be based on your response
to a couple of simple questions. Since the
lender is concerned about the repayment
of the loan, they will be interested in
your budget.
Please be prepared
to discuss briefly how you determined your
budget, and how you came to decide on what
you could afford. The best way to determine
this is to:
- Take your gross income per month
and cut it in half.
- Take one half and subtract
your rent or mortgage.
The amount of money
left over is what you can budget up to and
be ok.
The amount that you
budget for must include your car payment
and insurance. This brings us to the next
concern. Be prepared to offer information
when asked about the cost of your insurance.
Take the time now before
they call to obtain a couple of insurance
quotes. This is an act of a responsible
person concerned about the well-being of
the bank's collateral and, responsible people
get loans. Its that simple.
For your convenience
we have added a couple of links below that
will allow you to obtain free insurance
quotes. We suggest that you use them for
a couple of reasons. First, to make sure
that you are getting the best rate available
to you and second to ease any concerns the
bank may have about the seriousness of your
resolve. If you're not sure of what type
of vehicle you want, just pick something
you would like to have and obtain your quotes
on it. For this exercise the exact vehicle
is not important. You can make your final
decision about that at the time of signing.
If you have any question
please contact us,
and we will promptly reply.
Thank you in advance for your business and
good luck!
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