How to Prove you're a Low Risk Borrower in Oakville

How to Prove you're a Low Risk Borrower in Oakville

Posted on July 6, 2021

Finance is all about managing risk and auto loans are no different. The lower the risk you are perceived to be, the lower the rate you’ll have to pay, which could save you a lot of money. You’ll also stand a higher chance of being accepted for the loan too. How can you demonstrate you’re a low risk borrower? Our Oakville auto loans team offers three ways we recommend all our clients to help increase their chances of getting an auto loan.

Pay your bills on time

There is a good reason why your payment history makes up a third of your credit score. Because it’s such an important market for future lenders.

If you always pay on time and have never missed a payment, you’re considered a low risk. If a lender agrees an auto loan, chances are it will be repaid in full.

If you always pay on time but have missed a very occasional payment or paid late, a lender will look carefully at your application but will still likely approve it. Life happens after all.

If you have regular missed payments on your credit report, you will be regarded as a higher risk. No lender wants to have to chase payment or risk having them missed!

Manage your debt levels

Borrowing too much and struggling to pay everyone back is a red flag to lenders. We all want you to borrow sustainably and be able to manage your finances.

If you have lots of debt already, a lender will look at your application very carefully. They have to make sure they don’t lend you too much or push you over the financial edge with the loan.

If you don’t have much debt, you’re regarded as a lower risk because an auto loan is unlikely to cause you to struggle. As long as you pass the affordability check, you should be fine.

Watch your credit utilization

Credit utilization is the amount of revolving debt you’re using. Revolving debt is the debt you have free access to use and pay, like credit cards.

If you have several cards you hardly use, or use and pay off regularly, you’ll have low credit utilization and be regarded as a low risk. You have credit available but are using it sensibly, which paints a positive picture.

If you have several cards and they are all maxed out or have high balances, this is high credit utilization. This is also high risk. You have a lot of revolving debt which will be a drain on your finances.

It also paints a picture of someone who is either struggling or cannot effectively manage their finances, which is also an indication of high risk.

If you follow any advice in preparation for your Oakville auto loan, follow this. Always pay on time, don’t get into too much debt and don’t max out your credit cards.

All three can show a potential lender you’re a high risk or low risk borrower, with the inevitable results!

Contact Unique Chrysler for help, advice and competitive Milton car finance and leasing.

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