What to expect with approved auto loans if you have less than perfect credit
The last two decades
Credit-challenged car buyers often don't know what to expect once they've received a loan approval.
We know what they're facing from because for the last two decades we've been helping auto buyers with low FICO scores here at Auto Credit Express. We even designed our website so that these car buyers can research subjects like repossession and today's topic, understanding the subprime auto loans process.
When you apply
The first thing you'll notice is that you won't pick out a car right away.
Once you're contacted by a dealer that matches your needs, the first thing that will occur is an interview by a finance manager.
Once the interview is complete, your credit application will be submitted to the lender or lenders that fit your credit profile. Even then, you'll usually wait until the finance manager receives a notification from the lender before you're shown any vehicles.
This is why:
Once an application is received from the dealer, the lender checks your income and pay stubs for verification. You may also need to prove your job time, work and income history with W-2 wage statements from prior years.
Any additional sources such as child support or disability also typically need to be validated with court orders, determination letters and possibly even bank statements.
The lender then examines your expenses and computes a payment range you can afford using your monthly debts and factors in such expenses as auto insurance.
Once you're approved, the lender will then usually place you in a program tier based on your credit scores plus additional factors such as job stability and previous payment history.
The tier you're placed in dictates such conditions as the interest rate, contract term and down payment requirements.
All this is then transmitted to the dealer in the form of a payment call.
Once the dealership receives this information, the finance manager will then determine which cars in inventory meet the requirements of the payment call. For example, with most subprime lender programs, the newer the car and the lower the mileage the longer the loan term allowed. In some cases, newer vehicles will also qualify for lower interest rates.
This is usually the point at which problems can occur. Many customers will pick a car based on what they want, say a 5 year old pickup with 70,000 miles. Even if it looks good and drives nicely, the available loan term may be short and the interest rate charged by the lender may also be higher.
In other words, the truck may look nice, but because of its age and mileage, the payment may not fit into the budget set for you by the lender. In this case, it's time to choose a different vehicle.
The Bottom Line
Once you gain a basic understanding of the loan process, you can avoid some of the problem issues including picking the wrong vehicle. At the same time it's good to remember that the goal is to establish your auto credit, not finance your dream vehicle.
Auto Credit Express specializes in placing customers with poor credit scores with those dealers that can give them their best chance at getting approved auto loans.
So if you're ready to establish your car credit, you can begin now by filling out our online car loans application.