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Car Loans In Canada: What Can Affect Your Interest Rate?

January 31, 2019

Car Loans In Canada: What Can Affect Your Interest Rate?

Are you interested in buying a new car? If you don’t have the cash upfront, auto financing is your only option. It is important to understand that interest rates are a crucial part of any loan program. In order to get a car loan in Canada, you have to pay back extra money on top of the principle. How much interest rate you have to pay depends on your financial situation. You must do some research to understand the factors that might affect your interest rates. Here are some of the factors that can have an impact on your car interest rates:

Employment history

Employment history can play a key role in helping you secure an affordable interest rate, especially when you have a bad credit score. Lenders have to make sure that the borrower is in a financial position to pay off the debt. How long do you need to be employed in order to qualify for a car loan? In some cases, it is possible to get approved for a car loan with less than 6 months of employment history.

However, your car loan application will be carefully evaluated. You will either get approved or denied depending on your situation. A stable employment history will make things easier for you. On the other hand, if you have a broken or patchy employment history, you might end up paying higher interest rates.

Debt-to-income ratio

Debt-to-income ratio is a comparison of your monthly income with your monthly debt payments. It becomes easy to pay bills and loans when your debt-to-income ratio is low. A high debt-to-income ratio means you are spending more than you can afford. Car loan providers use this indicator to determine your ability to afford a new loan. When your debt-to-income ratio is low, you are likely to get a low interest car loan in Canada. You can use a simple tool to calculate your debt-to-income ratio.

When it comes to auto loans, having too little debt or no credit score can be disadvantageous. If you’ve never had a loan or mortgage before, it would be difficult for a lender to determine how dependable you are. This situation might encourage the lender to increase your interest rate.

Related: Auto Financing: How To Secure Low Interest Rates With Bad Credit

The economy

Almost every industry is heavily influenced by the economy, auto financing is no exception. If people are earning more and the economy is strong, the interest rate is likely to be lower, and vice versa.

Simply put, lenders don’t just randomly pick a number to determine your interest rate. It’s a complex process that includes many variables to determine your car loan interest rate. In order to get approved for an affordable car loan, contact a reliable auto financing company. Find My Auto is where you can easily get a car loan on terms that suit your financial circumstances. Fill out our application form to get started now! It’s completely free and we only contact you if you qualify.

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