When you have less than perfect credit and need a car loan, you’re going to find that bad credit lenders, or subprime lenders, have additional requirements you need to meet. There are rules about your income, vehicle, and loan that must be met. To learn more about these requirements, keep reading.
5 Things You Need to Qualify for a Bad Credit Auto Loan
To qualify for a bad credit auto loan, it's important that you know the rules of subprime lenders, and what documents you can use for proof. The specifics vary, but you can expect bad credit lenders to want to see these five things to approve you:
- Enough income – Subprime lenders want to ensure that you make enough income to support a car payment. Generally, they ask for a minimum pre-tax monthly income of $1,500 to $2,000 from one job. You should bring in a recent computer-generated pay stub showing year-to-date earnings to serve as proof of income.
- You to be at least 18 years old – You can’t legally apply for a loan in the U.S. unless you’re at least 18 years old. Bring in your driver’s license or valid state I.D. to prove your identity.
- A stable residence – Bad credit lenders want to make sure that you have a stable residence where the vehicle is going to be kept. Bring in a recent utility bill in your name that lists the address on the application.
- A down payment – You typically have to make a down payment in order to get approved. Most subprime lenders require a minimum of $1,000 or 10% of the car’s selling price, whichever is less.
- A working phone – Lenders want to make sure you can be contacted. Bring in a recent phone bill in your name showing the address on the application to serve as proof of phone. It can be a landline or contract cell phone.
In addition, although not required for approval, subprime lenders need you to provide a list of five to eight personal references. These can be anyone you know, as long as they don’t live at your address. Make sure you include full names, email addresses, work and home phone numbers, and home addresses.
What About Vehicle and Loan Requirements?
Not only do you need to qualify for the loan, the car needs to as well. Bad credit lenders aren’t going to finance just any model since it must fall within their vehicle guidelines. The general rule of thumb is that they don’t finance cars that are over 10 years old and/or have over 100,000 miles.
When it comes to your bad credit auto loan, there are three things that must be met:
- The amount financed must be at least $5,000. This doesn’t mean your vehicle has to sell for at least this much, it means that the overall cost of the loan must be greater than or equal to $5,000.
- You also have term limitations you must follow. Generally, your loan must be at least 36 months, and no more than 84 months.
- Finally, your loan to value (LTV) ratio must follow the lender’s guidelines. An LTV ratio is the amount financed relative to the value of the car. Typically, the maximum LTV ratio ranges from 120% to 150% of the vehicle’s retail value.
Find a Dealership Near You
Now that you know what bad credit lenders require to approve you for an auto loan, are you ready to find a local dealership to work with? If so, you’ve come to the right place.
Here at Auto Credit Express, we’ve been helping customers get the financing they need for over 20 years by connecting them to local special finance dealers that have the proper lending resources available.
Let us help you get that car loan you’ve been looking for. All you need to do is fill out our easy, free, and no-obligation auto loan request form, and we’ll get right to work for you!