You’ve dealt with the emotional roller coaster of divorce, but to make things worse, your credit may have been on that ride, as well. You ex could have ended up with the car you shared, or you may still be co-borrowers on a loan. While divorce can be very stressful, getting an auto loan with tarnished credit doesn’t have to be. There are options for those in unique credit situations.
Subprime Credit and Divorce
After a divorce, your credit and income may have taken a hit. If you and your spouse both worked, which is becoming the norm, you’re left to completely recalculate your budget.
For those with bad credit stemming from situations such as a divorce, job loss, or medical issues, there are dealerships that work with special finance lenders that concentrate on lending to borrowers with subprime credit – generally referred to as a credit score below 640.
If you’ve found yourself in this credit zone for the first time, the car buying process may be different than what you’re used to. But no fear, we’re here to help you prepare!
Budgeting and Preparing for an Auto Loan
To prepare for a subprime auto loan after divorce, here are some tips and general guidelines:
- Budget: Having a monthly budget can really help you get a grasp on where you stand, and help keep track of any spending. It can also help with saving for the down payment that you need for a subprime car loan. Keeping track of your spending is easy since there are many apps you can download right to your phone. As a bonus, some budget and banking apps can provide you with your credit score.
- Plan for a down payment: Once you have an established budget, save for a sizable down payment. Expect lenders to require at least $1,000 or 10% of the vehicle’s selling price, whichever is lower. The more you can save, the more you increase your chances of getting approved.
- Get your credit report: You can request your credit reports for free every 12 months from the three major reporting bureaus: Experian, Equifax, and TransUnion. Check for any possible errors and address any outstanding negative accounts that you may have.
- Communicate with your ex: If you and your ex are co-borrowers, or joint applicants, on a previous auto loan, you or your ex have to refinance or completely pay off the car to get out of the arrangement. For more information on co-borrowers, click here.
- Gather your documents: Subprime lenders typically want proof of employment, proof of residency, proof of a working phone, a list of personal references, and a down payment. They also generally require an income of at least $1,500 to $2,000 a month before taxes, and steady employment with six months to one year at your current job with a work history of three years to show. These are the usual requirements, but they vary, so be sure to get your paperwork in order so you’re not left scrambling or taken aback.
Move Toward Repairing Your Credit with an Auto Loan
Once you have a budget established, a sizable down payment, and your documents and loose ends in order, you can start to repair your credit with an auto loan after divorce. At Auto Credit Express, we have a nationwide network of dealerships that work with special credit circumstances.
We have created a free, no-obligation car loan request form that you can fill out from the comfort of your home. Once completed, we’ll get to work matching you with a dealer in your area. Get started on repairing your credit and get yourself back on the road.