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Why do lenders loan 10-20% over?

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masscredit
Valued Contributor

Why do lenders loan 10-20% over?

I know I've seen lenders advertise that they will lend 10% over the price (or was it value?) of the vehcile and I believe there are some that will do 20% over. Wondering why? I've had times when I've financed everything into the loan like sales tax so that might be one of the reasons, In a way I wouldn't think that would be good for the lender if someone defaults and they are upside down. 

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pizzadude
Credit Mentor

Re: Why do lenders loan 10-20% over?


@masscredit wrote:

I know I've seen lenders advertise that they will lend 10% over the price (or was it value?) of the vehcile and I believe there are some that will do 20% over. Wondering why? I've had times when I've financed everything into the loan like sales tax so that might be one of the reasons, In a way I wouldn't think that would be good for the lender if someone defaults and they are upside down. 


Yep in some cases a new car loan ( with not much down ) will exceed the book value once taxes, title, etc... have been added on.    Banks do this to allow low down payment loans, and I'm sure they'll factor risk into the interest rate Cat Wink

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
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