Your Total Debt Service Ratio and Getting an Auto Loan

Maybe you’ve had this experience before? Your credit is perfect but you just got declined for an auto loan. When walking into the car dealership you were so confident that you would be approved for an auto loan, you never even considered that the loan could be declined. This is a common auto loan scenario.

All over Canada people with perfect credit histories are being declined on their auto loans. These are people that don’t have any bad credit and have never missed a payment. These are people who have never missed a payment on their mortgage, people who always make their credit card payments on time and people who are even driving around in perfectly paid current car and truck loans.

Even with a perfect payment history, no record of bad credit and even a great job, you could still be declined for an auto loan.

Individuals with bad credit history or other credit problems expect the approval process to either be a challenge or their auto loan to be declined.  It’s the individuals who always work hard to pay their debt and credit cards on time and have a flawless payment history who never see it coming. The ‘it’ they never see coming is the Debt Service Ratio Decline.

The Debt Service Ratio Decline is generally an indication that your credit score and history are ok but on paper you just can’t afford the auto loan you want.

Total Debt Service Ratio – This is your “debt load” and how banks decide what you can or can’t afford. The method for determining your Total Debt Service Ratio (sometimes referred to as TDSR or DSR) is simple. Take your total monthly liabilities (the debt owed to creditors every month) and divide it by your gross monthly income. The resulting percentage is your Total Debt Service Ratio.

 If your Total Debt Service Ratio (including the monthly payment of the auto loan you’re applying for) is too high for the bank or finance companies policies, then you’re labeled a risk and your auto loan will be declined.

Lending money is never as simple as yes or no. Banks and finance companies can’t just look at your credit score when they decide to approve or decline you on car loan. They must also look at the relationship between your monthly debt and your monthly income. This is common practice in most lending circles but the good news is that there are finance companies and Auto Loan Experts that specialize in getting consumers with high Total Debt Service Ratios approved.

Car Credit Hero- The Auto Loan Expert Sworn to Correct your Credit, works with Finance Companies that specialize in high Debt Service situations. So even when you’ve been declined by a regular bank over your Debt Service Ratio, you still have options. Our Auto Loan Experts will do their best to use their bank and finance company relationships to get you approved on an auto loan even with your high Total Debt Service Ratio. 

Apply Now for the Auto Loan you deserve.

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Car Credit Hero – The Auto Loan Expert Sworn to Correct your Credit, often serves the Oshawa, Northumberland (Port Hope and Cobourg), Belleville, Peterborough and Bowmanville areas. We also proudly approve auto loans for credit challenge customers anywhere in Ontario. Apply Now or Contact Us.