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Why Can't I Get An Affordable Car Loan In Waterloo?

Why Can't I Get An Affordable Car Loan In Waterloo?

It’s reader question time again. This time it’s from a Waterloo auto loan customer who wanted to know why her friend’s car loan was cheaper than hers even though they borrowed the same amount. Somehow they have gotten themselves a very affordable car loan but you have not.


As this isn’t something we deal with every day, we thought it would make a good subject for a blog post!


How Waterloo auto loan costs are worked out


First off, any differences in costs are nothing personal. They are just because the system assesses every application on its own merits.


Most differences in Waterloo auto loan costs will be around the interest rate. That is assessed using a combination of things which we’ll get into in a minute.


Essentially, the higher risk you are perceived to be, the higher the interest rate you’ll pay. Interest is partly down to the prime rate but also the lender’s profit and some insulation from loss.


Those borrowers seen as higher risk will pay higher rates to help insulate the lender should you default on the loan. The exact calculations are complicated but the higher the risk you are perceived to be, the higher the interest rate you’ll pay.


An auto loan is assessed based on:


Your income and outgoings – The amount you can borrow and the rate you’ll pay will partly depend on your income and your outgoings. If you have lots of disposable income and can easily afford the loan, you’ll get a lower rate.


The amount of debt you have – If you don’t have much debt, your debt to income ratio will be low, reducing the perceived risk, which results in a lower interest rate. Those with fewer debts are viewed as being more likely to complete the loan, which is lower risk which means lower interest.


Your credit score – Higher credit scores pay less interest while lower scores pay higher interest. This is all about perceived risk. Those with high credit scores are seen to handle debt better. Those with lower scores may have difficulty managing debt, which a lender will perceive as risk.


That risk will be reflected in the interest rate.


Your credit score is influenced by many things including how much debt you have, how many credit card or other debt products you use, how much you earn, your payment history and lots more besides.


It is unlikely that two people who know each other will have exactly the same credit score unless they are very alike!


Your debt to income ratio – We have mentioned this already but it’s worth mentioning again. The amount of debt you have will influence your credit score and how much interest you pay. The higher the ratio, the closer to the edge you are seen to be with debts and income. The lower the ratio, the more space you have between your income and your debt obligations.

Those are just some of the reasons one Waterloo auto loan will cost more than another. There is a lot more that goes into calculating the cost of car loans but you get the idea, hopefully this helps you work towards an affordable car loan.


When you’re ready for a car loan, get in touch with the Waterloo auto loan experts at Northway Ford for great deals on auto finance.


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Categories: Car Loan

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