What's a Car Loan Affordability Check Do I Need One?

What's a Car Loan Affordability Check Do I Need One?

Posted on June 24, 2022

A car loan affordability check is a vital part of the application process and something everyone has to go through. It’s a relatively painless process but does mean a little more paperwork. It is designed to protect you though, so isn’t all bad.

Our Beamsville auto loan team explains everything you need to know about affordability checks and how to pass them.

What is an auto loan affordability check?

An auto loan affordability check is exactly what it sounds like. A simple check to make sure you can afford the car loan you’re applying for.

Ever since the crash of 2008, lenders have been obligated to ensure all borrowers can afford the loans they are taking out. That’s where the affordability check comes in.

A simple check of your finances to make sure you have enough each month to make payments.

How is an affordability check conducted?

The auto loan affordability check is a paper exercise that looks at your credit score, your income, outgoings and the amount of the loan.

We subtract your outgoings from your income to see how much you have left at the end of each month. Once all your debts and bills are paid, do you have enough left to comfortably repay the loan?

If you do, you’ll pass the auto loan affordability check.

If you don’t, you likely won’t pass the auto loan affordability check.

How will I know if I’ll pass a car loan affordability check?

You will soon know whether you would pass an auto loan affordability check when you begin preparing for the loan.

We recommend putting together a budget at the very beginning of the process so you can see clearly what you have coming in and what’s going out. You should see very quickly whether you have enough at the end of the money to repay a loan or not.

We also recommend Beamsville auto loan prequalification. It’s like getting a quote for a loan. It can give you a rough idea of how much you could borrow. Auto loan calculators do a similar thing.

If you’re finding it difficult to have any money left over once everything is paid, you probably cannot afford the loan or need to make savings.

If you have plenty left over, you will likely be able to afford the loan repayments.

Beamsville auto loan affordability checks

It may seem like auto loan affordability check are another roadblock getting in the way of you getting what you want, but they aren’t.

They are designed to protect you and to make sure you borrow sustainably. Nobody wants a repeat of the last financial crash and this is one of the ways to prevent it.

It may possibly mean not getting what you want, when you want it but it also protects you from much worse financial fates!

We will use all our skill and experience to deliver the lowest possible Beamsville auto loan rates, guaranteed. Contact Car Nation Canada Direct to learn how we can help.

Thanks for reading. Be sure to connect with us on Facebook, Twitter, Instagram, or LinkedIn to stay up to date on our latest great articles!