Opening a car dealership takes a lot of preparation and planning. If you are thinking about opening a car dealership and want to offer in-house financing, there are factors that you need to take into consideration before approving someone for a loan. Use the guide below to learn how to make sure that you are only approving loans that have a good chance of being repaid.
Ensure the Buyer Has a Consistent Form of Income
Before approving someone for a loan, you need to make sure that they will be able to have the money to repay it. The best way to do that is to have the person prove that they have money coming in each month. Someone who is on disability, on social security, or is employed will be able to show you how much money they receive each month. This will ensure that you know they make enough money to be able to afford the loan payment before you approve their loan.
Ensure the Buyer Has a Good Credit History
Consider hiring a company to run the credit history for anyone applying for a loan. You want to be sure that the person who is buying the car has a good credit history. Someone who does not pay their bills on time or who has numerous issues listed on their credit report could be a risk when it comes to offering a loan. The company will be able to find out exactly what issues are listed on their report, how long ago they were listed, and if they have made efforts to make repairs to their credit based off of the information listed.
Establish a Clear Written Agreement
Take the time to have a very clear agreement created for you and the buyer to sign. The agreement needs to list exactly what price the car is being sold for, if there is any down payment give, and what dates the payments are due on. You need to be sure that the buyer agrees to make the exact payments you require on the exact dates you require them to ensure that they make their payments on time.
Hiring outside help to help you with the review process for buyers can ensure that you will be able to make good decisions about which loans to approve and which you should deny. Taking the proper precautions before approving a loan will better your chances of having a successful business. For more information, contact companies that can provide credit reports for auto dealers.