When trying to get a car loan, you must meet specific requirements as a borrower. If you want to take out a car loan with a trade-in, you must also meet the requirements for the car you will buy. The requirements are the same, but certain conditions vary between different lenders.
Who Can Get a Car Loan?
You can get a car loan if you are 18 years old and registered in your country. You must also pass a credit check with the lender.
When you apply for a car loan, the lender takes a credit report on you. The credit report provides an overview of your finances and ability to repay the loan. The lender can see your income and whether you already have a payment history.
Basic Requirements to Get a Car Loan
Different lenders may make various assessments of your finances. But if it looks stable and you can pay a cash deposit for the car purchase, finding an alternative that fits should be possible.
- As with most loans, it is required that you have been registered in the country for at least a couple of years to take out a car loan.
- You must be at least 18 years old. Eighteen is the absolute minimum age to take out a car loan, but some lenders set the limit at 20.
- Steady income. You must have some steady income to take out a car loan. The lender must ensure that you can pay off your car loan according to the plan.
- You can pay a cash deposit. You must always pay a cash deposit if the car is collateral for the car loan. The car loan may not exceed 80% of the car’s value. For example, you can pay the rest with saved money or a private loan.
Do Banks Have Different Requirements for Their Car Loans?
Yes, some lenders may have additional requirements in addition to those we listed above. What these look like can vary significantly between different lenders. So, it is essential to look at other options and decide which one suits you best.
Additional requirements that lenders can set
- Income requirements. The lender may require a fixed annual income of a certain amount.
- No payment remarks. Many major lenders require a spotless credit history. If you want to take out a car loan with a ding on your history, it is usually a private loan without the trade-in vehicle that applies.
- Limited repayment period. Although you cannot always freely choose the repayment period you want, many lenders have a maximum limit.
What are the Requirements for a Trade-in with a Loan?
If you want to take out a loan with the car as a trade-in, you cannot buy just any vehicle. The vehicle must also meet specific lender requirements.
If you pay for the car with a private loan, you will avoid this problem. The vehicle does not stand as a trade-in, so its condition is not significant for the lender.
The requirements for the car can vary between different lenders. However, some conditions are mainly recurring.
Standard requirements for the car you will buy with the car loan
- Not too old. Lenders rarely grant car loans for vehicles that will be older than 12 years old when the loan is repaid. So, with a 6-year loan period, you need to buy a newer car than six years. Some lenders set the limit at 15 years.
- Costs a certain amount. There may be a minimum limit on what the car must cost for you to borrow money. The limit is usually different for different lenders.
- From an authorized car dealer. The car needs to be bought from an authorized car dealer so you can get a loan with it as a trade-in. In some cases, exceptions may be made to that rule in exchange for other requirements on the vehicle.
- Fully insured. The lender often wants the car to have full coverage insurance throughout the loan period. For the first time, however, new cars usually have a car damage guarantee, which meets that requirement even if you only take out half insurance for that time.
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