Consumer Car Buying Advice Blog

Bad credit car loan customers often do not know where to begin when they find that they need a new car.

The basics

At Auto Credit Express, it’s our business to match customers with bad credit who are in need of a car loan with automobile dealers that specialize in subprime car loans. But prior to beginning the application process, customers should also do a little homework of their own.

Credit score and history

You should know your FICO score and credit history. Most subprime lenders deal with credit scores in the 500 to 640 range. Anything above 640 is in the near-prime range (prime starts at about 720) which is also handled by these lenders, although credit unions, captive finance companies and some banks also dabble in this market from time to time (although the current market conditions have made this more difficult for many of these types of lenders).

Bad credit lenders also look at how long you’ve been “in the bureau” – meaning how far back your credit history goes. As with everything else, this can be very subjective, but at least 3 years in the bureau is a minimum with many lenders requiring at least a 5 year credit history in order to qualify for a loan. Having at least one previous auto loan is also a plus.

Income

Minimum income requirements are all across the board and vary widely with each lender. $1,500 per month for a gross income (before taxes) is usually considered the minimum, but keep in mind that this will severely limit the number of lenders that will consider your application. As a rule of thumb, the higher your monthly gross income, the wider your selection of lenders will be when it comes time for the dealer to submit your credit application.

In addition to your income, a lender will look at your other obligations in determining your creditworthiness (known as your debt to income ratio).

The car

Lenders will also want to know if you are trading in a car or if you intend to take on an additional vehicle payment. They also want to see that you are buying a car that you can afford. Remember, a bad credit car loan, sometimes called a second chance car loan, is not the time to consider buying your “dream car.” Most lenders want to see your car payment somewhere between 10% and 15% of your gross monthly income – so put off your “dream” until after you’ve reestablished your credit.

Down payment

Not may things give lenders the “warm and fuzzies” like large down payments (up to 20%). Customers that have equity in their vehicles have a tendency to want to hold onto them and not miss payments. Many lenders will also consider rebates – the larger the better – as all or part of a down payment. But even with rebates, nothing takes the place of cash from the borrower.

Other items

•    Job time – just like a down payment, the longer you’ve been on the job, the better it looks to the lender. A short time on the job, however, can be offset by other factors such as the amount of income, employment in the same field as well as stability in other areas, such as residency.
•    Bankruptcy – most bankruptcies must be discharged. Only a couple of lenders will consider a person that is currently in a Chapter 13 and even then, an order to incur additional debt must be received from the trustee before the lender will even consider looking at your application.
•    Be truthful – you should be prepared to back up anything you state on the application with written proof. Now is not the time to begin a career in “creative writing”.

The Bottom Line

At Auto Credit Express, our business is the subprime car market. We have helped literally thousands of people with bad, blemished, bruised and tarnished credit buy cars and reestablish their credit at the same time. Our national network of affiliate dealers specializes in bad credit car loans. Do you still have questions? Our web site will help you determine how much car you can afford and, unlike other sites, our toll free number is listed on every page in case you have any additional questions.

When you decide to buy a car, our credit application can be filled out in the comfort and security of your own home. For more information, visit www.autocreditexpress.com.

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