If you have less than perfect credit you need to understand how most subprime lenders will qualify you for a car loan
Car Loan Qualifications
Here at Auto Credit Express, for over twenty years we’ve been in the business of helping people qualify for a car loan with past credit issues through a participating dealer in our network. During that time, we’ve observed that consumers can accelerate the process if they take some time beforehand to determine if they meet some of the basic requirements of this type of car loan.
Income Requirements for High Risk Auto Loans
In this installment (there will be at least two more) we’ll go over the requirements for income, as well as how that amount correlates to an applicant’s monthly bills. Keep in mind that we’ll be discussing the overall picture and not a particular program from any one lender.
To begin with, the minimum monthly income level for applicants not only varies by lender, but can also change within a lender’s various programs (most have more than one). But looking at it as a whole, most will typically require a minimum monthly income of anywhere from $1,500 to $1,800 gross (before taxes).
The level of an applicant’s income is important for three reasons: To begin with, everything else being equal, the higher the income the better the chances of a loan approval. Secondly, the higher the income, the larger the available selection of vehicles will be. Finally, as the income level increases, the number of lenders willing to look at an application also grows – giving an applicant more finance options.
Another area that must be considered is that once the income level meets these requirements, lenders will then turn their attention it to the applicant’s total monthly debt level. This comparison is called the debt-to-income ratio and will determine if the applicant has enough available income, once those bills are paid, to comfortably qualify for a car payment plus the cost of full coverage auto insurance.
In this case, the ratio most lenders want to see is that an applicant’s total monthly bills, including car and insurance payments, not exceed 40% to 50% of their monthly gross income. In addition, most lenders will also be looking for a monthly vehicle payment that’s less than 15% to 20% of a borrower’s total monthly income.
For example, using a calculator, you can determine both your debt to income ratio and a monthly payment range for a car loan. By computing both first before filling out an application, you can avoid wasting both your time as well as the time of the dealership’s finance manager.
The Bottom Line
If you have credit issues, you can save yourself a lot of time and frustration by determining, on your own, if you meet the basic requirements of most high-risk lenders – before submitting an application for a bad credit auto loan.
Once you’ve done this and you believe you qualify, we want you to know that at Auto Credit Express we match credit-challenged applicants with those dealers that we believe can give them their best opportunities for approved auto loans.
So if you’re ready to reestablish your car credit, you can begin now by filling out our online auto loan application.
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