More cautious underwriting decisions on automotive loans

Car loan underwriters tend to be forgotten among the progenitors of the economic downturn, but sloppy choices regarding subprime loans created a great deal of defaults. Lack of care analyzing the subprime market’s ability to repay its automotive loans led to financial upheaval. Wards Auto reports this has led automobile finance businesses to take a closer look at incoming auto loan applications.

Examining details with auto loan underwriting

In order to get approved with a credit history that isn't quite up to speed for an automobile loan, there has to be greater attention paid. There are always possibilities to approve borrowers with a credit rating history with a few dings as long as severe dings aren't in it. The Price Waterhouse and Cooper consumer Financial Group senior manager Douglas Ekizian explained this. Underwriters are able to choose if a consumer will really pay a loan back when the applicant seems to have the ability to pay back the loan.

In general, better auto loan underwriting choices come when there is as much information as possible that is accessible. Ekizian explained that analysts can do "more than a cursory review of credit-bureau forensic analytics," when there is full income and employment data.

Financing for an auto by gut impulse

Alliance Acceptance CEO Ray Thousand explained that an auto loan underwriter is able to determine what will and won’t trigger an odd loan default based on the detail. If all of a credit history is clean, then a default after a job loss is overlooked. As the credit industry for automotive loans has relaxed somewhat, sometimes borrowers with a bankruptcy are considered, said consumer risk finance manager Adem Yilmaz of Toyota Financial Services.

"Determining willingness to pay back a loan is the gut call of the day. We're looking for evidence of ultimately trying to make good on the loan," said Thousand.

Auto loan defaults: Children of recession

The U.S. economy really struggled in 2008 and 2009 which was when there were the most auto loan defaults. Many of car loan companies either had to get bailout dollars or went bankrupt due to this. Hopefully the auto lending market can now make cautious underwriting choices. Then, the mistakes of the past won't be repeated.

Articles cited

Wards Auto

wardsauto.com/home/auto_loan_analysts_110204/

Understanding the role of loan underwriting

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