When it comes to financing a vehicle, you may be asking what your auto loan approval odds are and what kind of a car loan you can qualify for. If you have bad credit, it can be tricky getting approved for a traditional auto loan. But, when you work with the right lender, the process goes more smoothly.
How to Qualify for a Car Loan
Just exactly how much of a car loan you can get approved for is based on multiple factors. The requirements to qualify for a subprime auto loan can vary, but the more prepared you are, the better it will be. When getting ready for an auto loan, make sure you do these three things:
Request Credit Scores and Reports
Know where your credit stands before you apply and what’s on your credit reports. You’re entitled to a free copy of your credit report from each of the three credit bureaus – Equifax, Experian, and TransUnion – once every 12 months. Make sure the information listed is correct, and dispute any inaccurate marks with the associated credit bureau. Most lenders use the FICO scoring model to determine your eligibility. You can purchase your credit score from many different sources, but it may cost a small fee to get your FICO score from some providers.
Make Sure You Meet Basic Income Requirements
In order to qualify for a car loan, you’ll need to meet requirements outside of your credit profile. These include your income and employment. Typically, subprime lenders require a minimum monthly income of anywhere from $1,500 to $2,000 before taxes from a single source. You can apply for an auto loan with more than one source of income, but lenders only look at the one with the highest gross to meet the minimum qualification. As for employment, lenders like to see you’ve been at your current job for at least six months with a three-year employment history.
Budget and Prepare a Down Payment
Once you know where your credit stands and you’ve determined you meet the lender’s basic requirements, it’s time to budget. Using online tools, you can estimate the monthly payment you can afford each month and the type of car you could get.
Also, because you’ll be taking out a loan from a subprime lender, make sure you have a sizeable down payment. You typically won’t be able to get out of needing a down payment with bad credit. The typical minimum requirement is $1,000 or 10 percent of the vehicle’s selling price – whichever is less. Remember, the bigger the down payment, the more you’ll save on interest charges and monthly payments over the term of your loan.
The Bottom Line
You don’t need excellent credit to get an auto loan. Often, car buyers struggle with their credit, and many dealers have their own subprime department dedicated to these borrowers. The hard part is finding one of these dealers. When you’re ready to start this process, let Auto Credit Express lead you in the right direction.
We work with an extensive network of special finance dealers that have the lending resources available for people who are struggling with credit issues. There’s no obligation or cost for our service. Just fill out our auto loan request form to get started today.