Determining how much car loan you can get in Seattle can seem like a guessing game, but the process becomes clearer when you know the factors auto lenders use. All you need to do is learn a few simple calculations and do your research.
Steps to Estimating a Car Loan
Finding out the car loan amount you might qualify for in Seattle can be as simple as heading over to our easy Car Loan Estimator to plug in a few numbers. To get an accurate calculation, there are three things you need to know in order to estimate what size auto loan you might qualify for:
- Credit score – This is an important first step in any car buying situation. You should always know your credit score and what's on your credit reports. You can get a free copy of your credit reports by visiting www.annualcreditreport.com. You're entitled to one copy per 12 months for each of the major credit bureaus: Experian, TransUnion, and Equifax. Credit scores are typically available for free from a number of sources, such as your credit card company, bank, or credit union. You can also pay a small fee to get your FICO score (the most commonly used score) directly from www.myFICO.com.
- Monthly income – Loans are calculated from pre-tax (gross) monthly income. This amount is found on your paycheck stubs, which you need to have on hand to bring to the dealership, especially if you're dealing with bad credit.
- Recurring debt – The final step in seeing how much auto loan you can get in Seattle is to plug in four different numbers. These numbers give the lender an idea of how much money is already coming out of your budget. The four amounts you need to plug-in are: rent or mortgage payment, minimum monthly credit card payment(s), the amount of any wage garnishments, and any other loan payments you make.
Inputting the proper figures into the loan estimator gives you a more accurate estimate. However, this is just an example of what someone in your situation might get, and the exact figure depends on the lender you're working with.
How Much Car Loan Can You Afford?
Now that you know how much of a car loan you might qualify for, your next step is to determine if you can truly afford it. Just because you might qualify for a high-value loan doesn't mean you can realistically afford those payments.
You can determine how much vehicle you can afford by learning how to calculate your debt to income (DTI) and payment to income (PTI) ratios. These calculations let lenders see how much of your income is already set aside for your monthly bills and how much of a monthly car payment you can comfortably afford.
Seattle is an expensive place to live, and lenders don't want you to struggle to make your vehicle payment. This is why there are limits placed on DTI and PTI ratios that lenders stick to. Typically, if your DTI ratio is over 45 to 50 percent and/or your PTI ratio exceeds 15 to 20 percent of your income, you won't qualify.
Calculating these ratios is simple. For the DTI ratio, simply add up all of your monthly bill payments, including your estimated auto loan and insurance payments, and divide that sum by your pre-tax monthly income. You want that number to be under 0.45 or 0.50 (or 45 or 50 percent), but the lower the better.
For the PTI ratio, take your gross monthly income and multiply it by 0.15 and then by 0.20. The result is a payment range you should stay under. Of course, there are a lot of factors that determine a monthly payment, such as the interest rate, loan term, and how large of a down payment you make.
You can use online tools, like our Payment Calculator to adjust loan terms, interest rates, and down payment amounts so you can estimate the best combination. Remember, however, that interest rate is determined by your credit score, and you may be required to make a certain down payment amount.
Also, when you're adjusting your loan term, keep in mind that the longer the loan, the more you have to pay in interest charges. If you need to stretch a loan out to 72, 84, or 96 months just to be able to afford your car payment, then the vehicle is likely too expensive.
It's important to stick to a budget, because you risk missed payments and all the negative consequences that come with them if you can't afford your monthly payment. Defaulting on your loan can result in repossession, which is a major black mark on your credit.
The Bottom Line
Now that you know what you might qualify for, and how much you can afford to spend, it's time to find the right lender for the job. If you're suffering with credit problems, you don't need to shy away from getting an auto loan in Seattle.
Auto Credit Express works with a nationwide network of special finance dealerships that have lending resources available to help people in all kinds of credit situations – good, bad, and in between! There's no cost, our process is fast, and it's easy to get started. What are you waiting for? Fill out our online car loan request form today!