Originally Posted by kannibul

There are two types of debt they (issuing banks) look at:

Revolving credit (credit cards)
Non-revolving credit (bank loans, payment history w/ bills)


With credit cards, they look for revolving credit history first, then non-revolving, then compare that with debt-income ratio, how much available/approved debt percentage you're using, and current assets you have in the bank. Then they determine how much they'll approve you for, and the APR.

With a car, primarily they look at non-revolving credit history, if that's favorable they look at your debt to income ratio - combined they come up with an APR to insure they get their money's worth for loaning you the money to get the car, JUST IN CASE you default - so they can cover the expenses of collecting the car. The higher the APR, the more likely/earlier they think you'll default. In addition to those checks, they also do the ones mentioned with credit cards, however, since cars are a titled asset, and the title itself is securing the loan, tyically it's easier to get approved, and will typically have a lower rate than a credit card.