Hidden Factors That Affect Your Borrowing Power

Hidden Factors That Affect Your Borrowing Power

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Hidden factors that affect your borrowing power

If you’re looking to get a car loan, you should understand your borrowing power. It’s important to know how much leverage you have when entering into a loan so that you know where you stand.

  • Borrowing power or borrowing capacity is how much money a lender will loan to you.
  • There are many things taken into consideration when deciding your borrowing power, including income and employment, credit and other loans, and current living expenses.

At Positive Lending Solutions, we want to help you understand the factors that affect your borrowing power. We have decades of experience working in the car loan industry and we know what lenders consider when approving car loans.

Factors that can affect your borrowing power

1. Credit history

The first step in understanding your borrowing power is to be aware of your credit history. This is compiled on your credit record with your current credit score. It’s free and easy to check your credit score.

  • A good credit rating goes a long way to securing a loan.
  • If you have a bad credit rating, you can take several steps to improve it.

2. Employment records

Your employment status can really affect your borrowing power. It's helpful to reassure lenders that you have the capacity to service your car loan with a stable income.

  • Current pay slips can prove that you have a regular income.
  • If you’re self-employed, it can be harder to prove a stable income.

3. Loan Repayment History

If you are struggling to prove that you can pay back a loan, showing proof of previous loan repayments can greatly improve your borrowing power.

  • If you have paid back a loan in full in recent months, this is a useful evidence that a lender considers.
  • Many lenders have strict criteria but most will consider the whole of a client's borrowing power.

4. History of bankruptcy

Bankruptcy can be problematic when it affects your borrowing power. However, you can still find lenders who will consider your application if you agree to slightly different terms for a loan.

  • If you have been declared bankrupt in the past, you may struggle to get a car loan from a standard lender.
  • If you are currently declared bankrupt, it’s highly unlikely that you will get a pre-approval for a loan.

5. Living expenses

A potential car loan provider will want to get a clear idea about your living expenses in comparison to your monthly income.

  • Factors include number of dependants, lifestyle and other related expenses
  • Always have documents on hand to provide lenders with the information that they require.

6. Deposit or down payment

Finally, you should consider a down payment for your car loan. Whether or not you can pay a substantial deposit will greatly affect your overall borrowing power.

  • By increasing the amount of your initial deposit, you will reassure a lender that you can pay back the loan.
  • This also means that the loan is easier to service with a shorter lifetime and less interest.

Ask for expert help

When trying to get a complete picture of your borrowing power, you may want to seek expert help from Positive Lending Solutions. Our team of experts will give you instant access to a wide range of lenders, and the benefit of our experience and expertise in the car loan industry.

Getting a pre-approval on your car loan is much easier when you have expert help from Positive Lending Solutions. Save yourself time, money and stress by getting in touch today.

See also:

Fast Ways to Pay Off Car Loans

Down Payment for a Car Loan


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