Answering that question isn't easy as high risk lenders take a number of things into consideration when deciding the size of the loan credit-challenged borrowers qualify for, or even if they qualify at all.
Car Loan Approval Amounts
Here at Auto Credit Express, a question applicants with bad credit often ask us goes something like this: "How much will I get approved for?" But the fact of the matter is, we can't answer this question for two principle reasons. First of all, we are not a lender and, secondly, lenders have to consider a number of things before coming up with a loan amount including:
Income – How much you make has a direct bearing on the size of the car loan you will qualify for. Everything else being equal, the larger the income the larger the amount of the car loan will be.
Debt – We say "everything else being equal" for income, because the size of the loan is also directly affected by the amount of debt carried by the borrower. In this case, the larger the debt load carried by the borrower, the smaller the amount of the car loan.
Lenders consider both income and debt and calculate a debt-to-income ratio (DTI) for all car loan applicants. Once they do this, they also look at a borrower's:
Credit Score – Even though subprime lenders look past a credit score for ways to approve an application, they do use borrower's credit scores to place them in one of their tiered programs. These credit tiers determine such things as interest rate, maximum loan amount and the amount they will finance on a particular vehicle (as a percentage of its book value – called the "advance" on a vehicle).
Once these points have been reviewed (as well as additional items such as time on the job, employment history and residence stability), lenders can then determine the amount of the loan the borrower qualifies for, based on the type of vehicle they are looking at.
Calculating An Estimate
However, it is possible to give people a ball park estimate of how much their auto loan will qualify for by combining all the factors above and giving a rough number.
Everyone has additional circumstances that are unique to them however, so such calculators are only good for an estimate.
The Bottom Line
The question "How much will I get approved for?", especially for credit-challenged car buyers, can only be answered after a lender has taken a close look at their income, debts, credit score and other aspects of their credit profile.