The process of getting a bad credit car loan in Seattle requires you to meet a lot more qualifications than you'd have to if you were applying for a traditional auto loan with good credit. You might think that this is just one more thing standing in the way of getting a vehicle, but it's not. In fact, all the extra requirements you have to meet give the lenders that work with bad credit loans an opportunity to look beyond your credit score and really see your situation.
Know Your Credit Situation
The lenders that can look past your credit – called subprime lenders – work with special finance dealerships in and around the Emerald City, and we can help you find one. First, let's look at what you need to do in order to get through the bad credit car buying process.
There are a few steps you need to take at home before you jump into buying a vehicle. These things can help you be as prepared as possible, so that you can get the right auto loan for your needs. The first thing you have to do is get a copy of your credit reports and view your credit score so you know exactly what lenders see when they check your credit.
Even though a subprime lender may be able to get you approved for financing, you have to know that qualifying for the best interest rates available isn't possible with bad credit. By knowing your credit score and what's on your credit reports, however, you can do an internet search for the typical interest rates people in your credit score range qualify for.
This way, you know how fair of a deal you're getting. If the rates you're being offered are too far outside the average range, you can always walk away – nothing is set until you sign a contract.
Set Your Budget
How do you know if you can truly afford a bad credit car loan? Creating a budget is the second step you should take before you even set foot in a Seattle-area dealership.
All lenders go through a process of calculating what you can comfortably afford before they offer you a deal. They "debt you out" to make sure you don't go broke buying a vehicle. Believe it or not, lenders want you to successfully complete your auto loan.
You can do the same calculations at home to see what you can afford. The first part of this process is to calculate your debt to income (DTI) ratio. The DTI ratio tells a lender how much available income you have. They don't approve loans for people that carry a debt load over 45% or 50% of their monthly pre-tax income.
To find your DTI ratio: add up all your regular monthly bills, plus estimated car loan and insurance payments, and divide the total by your pre-tax monthly income. The resulting percentage is your DTI ratio, and the lower the number, the better your chances of getting approved for a bad credit auto loan are.
The next part of creating your budget is to determine the maximum monthly payment you might be able to afford for a car loan. This is known as your payment to income (PTI) ratio.
The PTI ratio lets the lender see how much of your available income is being used (or going to be used) for your monthly payment alone. Lenders typically don't let an auto loan payment exceed 15% to 20% of your monthly pre-tax income, but again, the lower the better.
To find your PTI ratio: determine your estimated car loan payment and divide that by your gross monthly income. Again, your results are going to be a percentage. Remember, you don't want to see a number higher than 15% to 20%. If it is, this auto loan payment is likely outside your budget, and you may need to think about a more affordable vehicle.
Prepare to Go to a Dealership
One last step to take before you head out along the Sound to visit a dealership is to prepare the documents that subprime lenders need. Though the specifics vary by lender, the typical standard requirements are:
- Proof of identity – A valid driver's license.
- Proof of income – A recent computer-generated check stub showing year-to-date income, from a single job, proving you make no less than $1,500 to $2,000 a month before taxes.
- Proof of residency – A current utility bill in your name, showing the address listed on your application.
- Proof of a working phone – A phone bill in your name, for either a landline or contract cell phone, at the address listed on your application.
- Personal references – A list of five to eight personal references complete with names, addresses, home and work telephone numbers, and email addresses.
- A down payment – The amount of money down required varies based on several factors. However, $1,000 or 10% of the car's selling price is the typical down payment requirement if you have less than perfect credit.
Find the Right Dealership in Seattle
Buying a vehicle when you have bad credit isn't like it is when you have good credit. But, if you're a Seattleite who needs a bad credit auto loan, you have no shortage of options available.
Now that you know what you need to do to prepare yourself for bad credit car buying in Seattle, all you need to do is find the right lender for your situation. You know you need to work with a subprime lender, but these lenders only work through special finance dealerships, and it's not always clear which dealers these are.
Luckily, you have Auto Credit Express on your side! We work with a large network of special finance dealerships all around the Emerald City and the rest of the nation, and we want to help you get connected to a dealer near you.
To get the process started, just fill out our free auto loan request form. We'll work to match you with a local dealership that has the lenders you need no matter if you're dealing with bad credit, no credit, or even bankruptcy. What are you waiting for? Get started right now!