It is possible for a consumer with bad credit to get approved for an auto loan. These buyers normally just need to go through a dealership that works with special finance lenders. However, there are also some requirements that must be met in order for a borrower to qualify for a bad credit car loan.

Most special finance lenders want to see proof of a regular, qualifying income. How long you have had your current job will also matter, as well as the amount of time that you have been at your current address.

Both renters and home owners with damaged credit can be approved for auto financing, but owning a home will give you an advantage.

The Advantage that Comes with Owning a Home

Approval for Auto Loan

When a special finance lender reviews your auto loan application, they will look for proof of residence. Normally, providing a utility bill that is addressed to you is a good way to prove that you live in your home.

Basically, lenders need to know where to find you if you stop making payments on your loan. This is why, if you have credit issues, your loan approval chances will be better if you've lived at your address for a long time. Owning a home, as opposed to renting a house or an apartment, should improve your acceptance odds even more.

  • Home ownership shows stability. Buying a home requires a large financial commitment. So, when a lender sees that you have committed to such a purchase, it seems likely that you won't be leaving soon.
    In the eyes of a lender, the fact that your residence is so stable makes you less of a lending risk. It is fairly clear that you will be in the same place should any payment problems come up.
  • Owning a home is good for your credit. If you have a mortgage through a bank, the payments that you make will be reported to the credit bureaus. Of course, this is only an advantage if you have made all of your payments on time. Even if you have had some trouble with credit in other areas, your positive payment history with your mortgage will count in your favor with a lender.

If, on the other hand, you are renting, your landlord may or may not report your payments to the credit bureaus. Therefore, your monthly rent checks might not be building a positive payment history.

Gaining an Approval Advantage as a Renter

Even though owning a home may score points with a lender, being a stable renter can boost your auto loan approval chances too.

  • How long have you rented the same place? Even if you don't own your home, if you have been in the same place for several years, this is also proof of stability. If it is clear that you are an established resident, it will seem less likely that you will suddenly leave. Even if you have recently moved, if you have at least lived in the same area for a long time, a lender may not see this as a red flag. Also, if you have relocated for a job, your lender will take this into consideration.
  • Does your landlord report your rent payments? Most property owners do not report their tenants' payments to the credit bureaus, but some do. Find out if your landlord does report payments or is at least open to the idea.

There are companies like Rental Kharma that offer a rent reporting service. You simply have to sign up and pay a small monthly fee. Then, you can start to build your credit just by paying your rent on time every month. You will also establish a good payment history to show future lenders.

The bottom line is that owning a home is helpful if you have bad credit and need auto financing approval. However, renters can also find success with special finance lenders. Also, getting approved for a car loan will give you an opportunity to build good credit. This way, down the road, you might have a better chance at buying a home when the time is right.

The Auto Credit Express Advantage

If you have bad credit and need to buy a car, Auto Credit Express can help. We can match you with a dealership in your area that is connected to special finance lenders. With our service, you can be approved and back on the road faster than you think.

Applying with us costs nothing, and you won't be under any obligation to purchase anything. So, you have nothing to lose except another day without a car. Go ahead and fill out our simple and secure online application to get started today.