How much can I afford to borrow with a car loan?

How much can I afford to borrow with a car loan?

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Learn your limits when it comes to financing a car.

You’re ready to buy a car — and even have your eye on the new Nissan Leaf electric car. But can you afford it? Before taking out any kind of loan, understand what your personal borrowing power is tells you what you’re eligible for and can keep you from choosing terms you can’t afford.
car.Loan.com Car Loans

Our top pick: car.Loan.com Car Loans

Get matched with a local car dealership to finance your car purchase. Bad credit, no credit OK.

  • Specializing in 'buy here, pay here' car loans. No banks or credit unions.
  • Typically hear back from a rep within 24 hours.
  • Free loan-matching service. No obligation offers.

    How do lenders determine my borrowing power?

    Lenders consider your monthly living costs and weigh them against your monthly income to see whether you can afford loan payments. However, it gets more involved when you start factoring in:

    • Multiple incomes
    • Credit card and loan debts
    • People who are financially dependent on you

    Debt-to-income ratio and borrowing power

    Another important factor that’s rolled in to how much you can borrow is your debt-to-income ratio. A good rule of thumb is that the debt you pay each month should account for no more than 40% of your monthly income — anything much higher may be seen as a red flag.

    When it comes to your vehicle, financial specialists recommend that no more than 20% of your monthly take-home pay should be used towards car expenses.

    Find a car loan that’s right for you

    Rates last updated November 13th, 2018

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    Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
    Name Product Product Description Min. Credit Score Term of Loan Requirements
    car.Loan.com Car Loans
    Apply with a simple online application to get paired with a local auto lender. No credit and bad credit accepted.
    300
    Varies by lender
    Must be a US citizen with a current US address and employed full-time or have guaranteed fixed income.
    Auto Credit Express Car Loans
    Get connected with an auto lender near you, even if you have bad credit.
    300
    Typically 3 to 6 years
    Must be employed full-time or have guaranteed fixed income of at least $1,500/month and be a current resident of the US or Canada.
    LightStream Auto Loans
    Quick car loans from $5,000 to $100,000 with competitive rates for borrowers with strong credit.
    Good to excellent credit
    Flexible terms
    Good or excellent credit, enough income or assets to afford a new loan, US citizen or permanent resident, 18+ years old
    RateGenius Auto Loan Refinance
    Connect with a network of over 150 lenders to refinance your car loan.
    510
    Varies
    Income of $2,000+/month, vehicle has less than 150,000 miles, no older than 10 model years, loan balance is at least $10,000, debt-to-income ratio: less than 50%.
    LendingClub Auto Refinancing
    Lower your monthly car payments and save on interest through a fast and easy online application process.
    Fair or better credit
    Minimum of 2 years
    Car must be less than 10 years old with fewer than 120,000 miles. Current loan must have a balance between $5,000 and $55,000 and at least 24 months left in its term.
    MotoRefi Car Loan Refinancing
    A car loan connection service for borrowers looking to refinance.
    525
    1–6 years
    Must have an income of at least $2,000/month and have a vehicle with less than 100,000 miles.
    LendingTree Auto Loans
    Compare multiple financing options for auto refinance, new car purchase, used car purchase and lease buy out.
    Good to excellent credit
    Typically 1 to 7 years
    Must be a US citizen and 18+ years old. Must have good to excellent credit.

    Compare up to 4 providers

    How to calculate borrowing power

    Use the calculator below to find out what type of car loan you’re in the market for.

    What else should I consider?

    You should also consider recurring monthly expenses before you apply to give yourself a detailed breakdown of your budget. This will help you figure out if you have room for another expense. Look at your personal finances, including:

    • Essentials. Think about how much you spend on housing, food, utilities, commuting and other essentials you can’t live without.
    • Extras. What do you spend when you go out to eat? Is shopping for clothes twice a month something you can give up? An ideal loan won’t require you to make significant lifestyle changes. If you’re stretching your budget, a loan may not be the right financial move.
    • Costs of owning and maintaining a car. These include vehicle registration, licensing, insurance, gas, repair costs and countless others. Leave yourself some financial leeway.
    • Debts. Loan payments and credit card bills can add up each month. If they’re not taken care of when the bill is due, you could damage your credit score.

    How can I increase my borrowing power?

    There are a few different ways to convince lenders that you’re capable of taking on a bigger loan, however, it may take some time and effort. A few strategies you can use to get a bigger loan in the future are:

    • Spend less. Drawing up a budget and sticking with it can free up some cash flow and help you create less debt. And once your start spending less, you can take those savings and knock down whatever debt you’ve accumulated in the past.
    • Improve your credit score. Paying bills on time, decreasing your debt-to-income ratio, using your credit card responsibly and correcting mistakes on your credit report can nudge your score in the right direction.
    • Eliminate your debt. Cutting your debt minimizes your credit utilization ratio, showing lenders that you’re not desperate for a line of credit.
    • Ask for a pay raise. Doing a great job at work and think you deserve a raise? Draw up a case as to why you deserve a pay increase. This extra bump will decrease your debt-to-income ratio and make you appear as a more attractive borrower.
    • Compare. Every lender may look at your ability to borrow differently. This is why it’s extremely important to get a few quotes and do your research before moving forward with the first loan offer.
    • Get a cosigner. A cosigner promises to take care of the loan if you default, increasing your borrowing power. Only ask someone to be a cosigner if you’re sure you’ll have no problem making the payments on your loan.

    Bottom line

    Remember to take into account all fees and taxes including the cost of the vehicle when determining how much you can spend on a car. Now that you know what to expect from lenders and what kind of borrowing power you have, you’re ready to compare compare car loans.

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