Past loan amount factor?

[Anonymous]

Hello! 

Today my co worker asked me some auto loan questions that I could gladly help with. One got me stumped though, as I never had an issue in the past with. 

He is interested in buying a new truck that'll run him $60-65k. He's only completed one auto loan for $11k. He heard that CU and banks wouldn't loan him that much since his only auto loan is tiny compared to that. That past auto loans play major relevance to higher auto loans. 

I couldn't really answer that myself as my first loan was tiny also, but I slowly grew and grew until I was approved for $80-100k plus.

I have heard that also, but how true does that hold? I know MANY factors play in, but it got my mind turning if that's a real thing. Guess it's kept me up, and bugging me to see what y'all say about that.  

Thanks ahead for the insight, just too curious now. 

P.S. my worker and I are close, he showed me his scores and all 3 FICO 8 are 770-790, and he makes the same as me at 130k plus a year. I told him aside from what he asked, if his DTI Is in check, then his income and scores look to easily support a $60k loan. 

[Anonymous]

I have heard this a lot, but in my opinion it is very circumstantial. I did work in a dealership and there were a few instances where banks did not want to issue approvals for high dollar loan amounts due to the existing loans being for a, comparatively, small amount. However, all of these situations had extinuating circumstances from short overall credit history, limited revolving credit limits, limited time on job, limited installment loan history, loack of a consistent address, or a combination of these factors.

Assuming he has had credit for several years, has been on the job for more than 2 years, and has had his $11k auto loan open for at least 1 year, I don't believe there will be much of an issue getting an approval. As always, a down payment can certainly help if the banks see something in the profile that looks risky.

[Anonymous]

Exactly what I explain to the best of my ability. CU and banks are so weird with loans and can be all over the place with rules, rates, and approvals. I said just shoot over apps when you're ready and at worst case they counter with they'll lend him! 

we talked about it today again, and my boss chimed in. He mentioned that my co worker has paid a mortgage on his house for a few years now and 100% payments and banks will see that paired with him working with me for 4 years now. 

I do agree with the down payment. I told him worst case they counter at example $40k and if you really want that said truck just cover the difference. Plus that'll protect him from being underwater at first! I'm heading with him to a Ford dealer Friday so it'll be a cool experience to see if he gets approved! Dude works incredibly hard!

[Anonymous]

With the mortgage payment history that should be sufficient installment loan history that I don't think a bank will have an issue with it. Worse case scenario he can finance through Ford credit (they are very likely to pick up a profile like his) and if the rate isn't the best he can refinance after a year.

Best of luck to him and I hope he gets everything he wants!

[dunn2500]

navy approved me for 47k with alot lower income than he has and when i paid loan off and applied again it jumped to 55k, this all within 7 months.......no POI and i have no mortgage and short history.....so there maybe something to the " increase % in auto loans"....so many factors and with his scores, mortgage steady job cant see a problem, plus my scores were lower, alot lower......i had nothing bad and long work/res history which probably helped and my debt is insanely low.....he should be fine

refi are easy and a blessing if something weird happens so covered either way.....rates are super low right now....pen fed just dropped dropped their i see for new cars to .99%

[KLEXH25]

I definitely think there is something to past loan amounts playing a factor in new loan amounts. I had a heck of a time finding an approval for my first auto loan, and when I finally got a few approvals, the max was $25k with 6-9% APR ranges. I refinanced that loan a year later and was approved up to $50k. I'm sure if I buy a more expensive car next time, my prequalifications will increase again. They want to see if you can handle larger payments first or at the very least, put down more money.