Random Auto Loan Thoughts

Anonymous · ‎05-13-2015

Hi,

Just wanted to start a conversation on some of my random thoughts throughout the day.

I've never had an auto loan. Prior attempts have been... unfulfilling - started a thread on it a month ago. I'll try again a year from now when my student loans are much lower; and that brings me to my first question. Will a lender still view my report negatively with no auto loan history? Or will they see that I've made every, single payment on time - and at least double the minimum - towards my student loans as "equal". I know "equal" is a strong word, as they are certainly not the same, but they sort of are? They're both installments. Both costly. The car I'm interested in is definitely lower than my $35k student loan.

I have a feeling the answer's going to be: auto loan history specifically for auto loans; but it just boggles my mind. It's as if someone sees you pay off a $35k 10-year loan (or however long it was set for) within 2 years, but doesn't believe you'll be able to pay off a $25k 4-year loan.

Thoughts? Haha.

SamsungHDTV · ‎05-14-2015

Hello there. Banker here, for a big national bank.

I don't know how other lenders view your situation, however I do know how my underwriting views it. And I assume its similar in most big banks. It may be different in credit unions, but I have no idea. With that being said, here are my thoughts about your random thoughts:

My lender WILL view your no auto loan history as negative. How will it affect you if you applied? They would likely only approve you no more than $20K for your first auto loan. Said another way: you'll have no trouble getting approved (assuming all else is good), but the loan amount will be limited to 20K.

You're right, we dont view student loans or mortgages the same as auto loans. I've had clients paying on student loans for years and still get limited to 20K. Same situation with a mortgage. I've asked my underwriting directly, "They're both installments, but not same?" Answer: nope. 20K!

They wont view how much payments you're making. As in, they wont see you're making double the minimum. They're only interested in the minimum for DTI calculations.

With that being said, thats direct financing (applying directly through my bank). You can however get approved through my indirect financing (via the dealership) with less overlays.

Example: Perfect client comes in (credit 700+, income $100K+, low DTI, ect), only problem - no auto loan history. Sounds like you maybe. Applied with me - we countered at 20K. He wants 35K. He applies through the dealership, and gets approved for the full $35K and a great rate through my bank but indirect channel. That's when I found out my direct and indirect auto loan channels have different underwriting guidelines. I hope the client didn't feel slighted, because basically two inqs from my bank I think. But I gave him great advice overall.

Hope this answers your random thoughts.

StartingOver10 · ‎05-14-2015

^^^ This post should be a sticky. It gives accurate insight into the loan process for that big bank even though we don't know which one it is.

TRC_WA · ‎05-14-2015

@StartingOver10 wrote:
^^^ This post should be a sticky. It gives accurate insight into the loan process for that big bank even though we don't know which one it is.

Agreed...

I just opened my 3rd auto loan in January.

Back in 2006 I had a $10k loan... 2013 got a $21k loan... and in 2015 I had a difficult time but got approved for a $43k loan... $0 down. The no down payment was a denial reason on a few of the apps despite my 707 auto FICO.

Lack of credit experience at this loan amount was another denial reason.

Got my dream car though at a decent rate and kept money in my pocket. I plan to refi to BECU's best rate (1.99%) in October when my TU report is clean and I meet the required 700+ score.

FICO8 current as of : 4-17-24 EQ: 724 TU: 707 EX: 706
Hard INQs last 12 months: EQ: 5 | TU: 8 | EX: 9
Verizon Visa $8500 Amex Delta Reserve $10,000 Care Credit $18,000
NFCU CashRewards $7500 Apple Card $7000 Best Buy $8000 Amazon $5000
NFCU auto loan (2022 Ford Bronco Sport Badlands - Cactus Gray) 6.95%
NFCU motorcycle loan (2024 Harley Davidson Road Glide - Alpine Green & Chrome) 9.45%
Total CL: $64,000 --- Total CC UTI: 27% --- AAoA: 5.5 years --- Income: $200k
Last app: 4-6-24

jacksont1981 · ‎05-14-2015

@SamsungHDTV wrote:
Hello there. Banker here, for a big national bank.

I don't know how other lenders view your situation, however I do know how my underwriting views it. And I assume its similar in most big banks. It may be different in credit unions, but I have no idea. With that being said, here are my thoughts about your random thoughts:

My lender WILL view your no auto loan history as negative. How will it affect you if you applied? They would likely only approve you no more than $20K for your first auto loan. Said another way: you'll have no trouble getting approved (assuming all else is good), but the loan amount will be limited to 20K.

You're right, we dont view student loans or mortgages the same as auto loans. I've had clients paying on student loans for years and still get limited to 20K. Same situation with a mortgage. I've asked my underwriting directly, "They're both installments, but not same?" Answer: nope. 20K!

They wont view how much payments you're making. As in, they wont see you're making double the minimum. They're only interested in the minimum for DTI calculations.

With that being said, thats direct financing (applying directly through my bank). You can however get approved through my indirect financing (via the dealership) with less overlays.

Example: Perfect client comes in (credit 700+, income $100K+, low DTI, ect), only problem - no auto loan history. Sounds like you maybe. Applied with me - we countered at 20K. He wants 35K. He applies through the dealership, and gets approved for the full $35K and a great rate through my bank but indirect channel. That's when I found out my direct and indirect auto loan channels have different underwriting guidelines. I hope the client didn't feel slighted, because basically two inqs from my bank I think. But I gave him great advice overall.

Hope this answers your random thoughts.

Awesome information!!! Question does it matter how long ago or recent the auto loan is? Or as long as you have one on your credit reports?

Started 6/2014 EX 594 EQ 617 TU 580 FICO's Goal is 740's and up

Anonymous · ‎05-14-2015

@SamsungHDTV wrote:
Hello there. Banker here, for a big national bank.

I don't know how other lenders view your situation, however I do know how my underwriting views it. And I assume its similar in most big banks. It may be different in credit unions, but I have no idea. With that being said, here are my thoughts about your random thoughts:

My lender WILL view your no auto loan history as negative. How will it affect you if you applied? They would likely only approve you no more than $20K for your first auto loan. Said another way: you'll have no trouble getting approved (assuming all else is good), but the loan amount will be limited to 20K.

You're right, we dont view student loans or mortgages the same as auto loans. I've had clients paying on student loans for years and still get limited to 20K. Same situation with a mortgage. I've asked my underwriting directly, "They're both installments, but not same?" Answer: nope. 20K!

They wont view how much payments you're making. As in, they wont see you're making double the minimum. They're only interested in the minimum for DTI calculations.

With that being said, thats direct financing (applying directly through my bank). You can however get approved through my indirect financing (via the dealership) with less overlays.

Example: Perfect client comes in (credit 700+, income $100K+, low DTI, ect), only problem - no auto loan history. Sounds like you maybe. Applied with me - we countered at 20K. He wants 35K. He applies through the dealership, and gets approved for the full $35K and a great rate through my bank but indirect channel. That's when I found out my direct and indirect auto loan channels have different underwriting guidelines. I hope the client didn't feel slighted, because basically two inqs from my bank I think. But I gave him great advice overall.

Hope this answers your random thoughts.

This answers my random thoughts as well as my random thoughts that I had not thought of yet. Thanks for the clarification SamsungHDTV!

SamsungHDTV · ‎05-14-2015

@StartingOver10 wrote:
^^^ This post should be a sticky. It gives accurate insight into the loan process for that big bank even though we don't know which one it is.

@StartingOver10 - I could reformat and repost, titled something like "No auto loan experience?" It is a very common question on these forums.

@Mods - Let me know. I would like to add to my two other stickies on the forums as contributions to the myfico community.

@TRC_WA - I could have put this in my original response: My bank also wants to see you have had auto loan experience of at least half of what you're applying for. So in your case you wanted $43K, and you had previously $21K. My bank would have approved you for 42K if you asked for it and had the $1000 down payment. Did you not have a down payment? So your denial reason, "Lack of credit experience at this loan amount" means they want to see you have paid a loan amount of at least half of what you're applying for.

@jacksont1981 - nope as far as I'm aware, as long as the auto loan is reporting still.

@OP - glad it helps.

Anonymous · ‎05-14-2015

That's disappointing to hear. $20k is something to work with for a new vehicle, but that's not a whole lot. But moral of the story here is that visiting every financing option you can before going to the dealer, and you will come out with a great deal. Sounds about right?

@SamsungHDTV wrote:
Hello there. Banker here, for a big national bank.

I don't know how other lenders view your situation, however I do know how my underwriting views it. And I assume its similar in most big banks. It may be different in credit unions, but I have no idea. With that being said, here are my thoughts about your random thoughts:

My lender WILL view your no auto loan history as negative. How will it affect you if you applied? They would likely only approve you no more than $20K for your first auto loan. Said another way: you'll have no trouble getting approved (assuming all else is good), but the loan amount will be limited to 20K.

You're right, we dont view student loans or mortgages the same as auto loans. I've had clients paying on student loans for years and still get limited to 20K. Same situation with a mortgage. I've asked my underwriting directly, "They're both installments, but not same?" Answer: nope. 20K!

They wont view how much payments you're making. As in, they wont see you're making double the minimum. They're only interested in the minimum for DTI calculations.

With that being said, thats direct financing (applying directly through my bank). You can however get approved through my indirect financing (via the dealership) with less overlays.

Example: Perfect client comes in (credit 700+, income $100K+, low DTI, ect), only problem - no auto loan history. Sounds like you maybe. Applied with me - we countered at 20K. He wants 35K. He applies through the dealership, and gets approved for the full $35K and a great rate through my bank but indirect channel. That's when I found out my direct and indirect auto loan channels have different underwriting guidelines. I hope the client didn't feel slighted, because basically two inqs from my bank I think. But I gave him great advice overall.

Hope this answers your random thoughts.

Anonymous · ‎05-14-2015

The whole process is one ridiculous goose chase with no direct answers.

My lowest score is a 726, oldest account is 5 years old. No negatives, no late payments but since I have no previous auto loan or mortgage I am viewed as having an "insufficient credit history".

They want you to have previous auto loan experience but noone wants to give you that first loan to being with.

Nothing but a **bleep** show.

Anonymous · ‎05-14-2015

@Anonymous wrote:
That's disappointing to hear. $20k is something to work with for a new vehicle, but that's not a whole lot. But moral of the story here is that visiting every financing option you can before going to the dealer, and you will come out with a great deal. Sounds about right?

I agree, $20k isn't much. Sounds about right - Explore your options until you stumble upon that one lender who happens to be more generous than the others; or let the dealer fish for you (dynamite fishing - see what floats to the top). I want to say that the dealer should be the last resort since we tend to lack faith in their honesty , but you never know.