Credit-challenged borrowers currently in a Chapter 13 bankruptcy typically won’t qualify for a new car lease (and they will have to petition the court, through the trustee, in order to purchase a vehicle). The good news is that there are programs out there that will allow them to reestablish their car credit.
Subprime lenders set minimum income levels to give borrowers the best chance to reestablish their auto credit by creating a realistic budget for their car payment.
The first thing borrowers should do before applying for a car loan is to check their credit reports (and correct any errors) and find out at least one of their credit scores. In addition, if they have poor credit and are self employed, they will need at least two years of professionally prepared tax returns showing after-expense proceeds from the business that meet the minimum requirements of subprime lenders.
A postdated check is not an acceptable down payment on a car loan and can result in the lender rescinding the deal and cancelling a dealer’s contract. The only way to avoid this, if the dealer is agreeable, is to wait until those funds are available before taking delivery.
Since most lenders that work with credit-challenged applicants only loan indirectly, what we do is match them to dealers in their area that represent their best chances to get approved for an auto loan.
To offset the increased risk, most subprime lenders will compensate by reducing the loan term as a vehicle’s miles increase. Likewise, the loan term will also be shortened as a vehicle’s age rises.
If you have two jobs, you can combine the income on the application provided it is received on a regular basis and it can be proven with documentation such as paystubs or bank statements. But since not all subprime lenders will allow this type of income, applicants will need to explain this circumstance to the dealer during the initial interview.