Your income and your bills will often determine if you qualify for bad credit auto loans
It’s not always how much you’re paid but what is left after paying your bills that can qualify you for terrible credit auto loans.
We’ve witnessed this situation many times after nearly two decades of being associated with bad credit auto sales here at Auto Credit Express.
We also know that a tote the note loan won’t help your credit scores and we can also explain the loan process to you (to reduce your chances of repossession).
So why don’t lenders that offer horrible credit auto loans just look at how much you make?
Your debt to income
When it comes to poor credit car loans it isn’t just how much you make that concerns bad credit lenders but also what you have left over after you pay your bills each month.
The first thing these lenders will do is calculate your debt to income ratio (DTI). You can do it, too, by adding up all your regular monthly bills including mortgage or rent payments, credit card payments, loan payments, average utility payments and anything else (such as student loans or child support) you have to pay.
Next, you divide this amount by your total gross monthly income (what you get paid before taxes and other deductions). This will give you your monthly debt percentage. Typical bad credit lenders will cap your total monthly debt (including car and insurance payments) at 50% of your monthly gross income.
At the same time, most poor credit lenders will not want you to have a car payment (plus insurance) that exceeds 15% of this same gross monthly income. This is known as a payment-to-income ratio (PTI).
This means that if your gross monthly income is $3,000, then your combined car and insurance payment can’t exceed $450. Since a typical lender will assume a $100 monthly car insurance payment, this leaves a budget of $350 or less for a car payment.
When you draw up your own budget, be sure to include expenses for gas and vehicle maintenance, which brings up another point.
If you plan on purchasing a used car without buying an extended warranty, you should plan on setting aside funds each month to cover the possibility of repairs.
By purchasing an extended warranty, especially if the car is close to or out of warranty, you’ll be guarding yourself against any unforeseen expenses caused by mechanical problems that might otherwise cost you hundreds or even thousands of dollars.
As we see it
By knowing the budget requirements and how lenders compute your DTI and PTI, you can decide for yourself if you meet these basic requirements of poor credit car loans.
We want you to know this because at Auto Credit Express we’ve helped thousands of people with poor credit finance a bad credit car and establish their auto credit through a network of dealers that specialize in horrible credit auto loans.
So if you are serious about getting your car credit back on track you can begin now by filling out our online auto loans application.
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