I have a decent credit score (low to mid 700's) and I'm pretty sure I could get approved for a loan. I'll be taking a new job in a new state in a couple of weeks and I would like to get my wife a new(er) car as she will not be going with me initially. My new job pays nearly double my current salary, but I've been told that I won't get approval because I'm new to the job. Would it be better to go ahead and get the loan now or wait until my new effective pay rate takes effect?
1 Answer
If your current pay is sufficient to support the debt, it would be better to apply for the loan now, with more of a job history. Sufficient depends on the lender, but generally you need a debt-to-income ratio of 36% or less. Income means gross income (before taxes, 401(k), etc) and debt means all debt including the new car loan, mortgage, credit cards, student loans, etc.
If you need the new, higher income to meet the debt-to-income ratio, you'll have to wait and take your chances.
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My only real debt is in the form of a credit card, the first I ever received, that I ended up maxing out without understanding the ramifications. A life lesson learned the hard way. My current total debt is less than $2k. As for whether my current pay can support the debt, I have no idea. I tend to err on the conservative side of such evaluations. Apr 7, 2015 at 12:49
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It's pretty easy to calculate if your income would support the debt. Current monthly gross income * 0.36 = max monthly debt payments. Subtract your one credit card minimum monthly payment. The result would be the max car payment you can afford. With no other debt, I'm guessing your current income should be sufficient. And you wouldn't want a car payment that was 36% or even 18% of your income.– stanniusApr 7, 2015 at 16:02
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1A quick update if anyone is curious. My salary at the time was ~$55k and I was approved for 18k loan at 4.6% interest through USAA. Feb 8, 2016 at 21:34