After the recent colossal economic crisis, a large number of people are incessantly falling into debt and looking for in debt solution . In such situation, these individuals often wonder if they can qualify for an auto loan. People usually do not get a car loan with bad credit because of the fact that they do not act smart or use their heads while applying for a loan. They simply do it hurriedly without giving proper information on the application or without completing the application accurately. Filling in the application correctly and following some important guidelines is necessary to qualify for auto loan with bad credit.
1. Reestablish the credit report:
Lenders usually check the credibility of the clients before approving them for auto loans. They verify the customers’ financial position in order to determine whether or not they can repay the loan in time. If the lender determines any applicant to be risky, then he/she might not qualify for the loan. The higher the risk perceived by the lender, the lesser the chances to qualify for the auto loan. So to prove yourself less risky before the lender, reestablish your credit report. To start with, order your credit report from the credit report bureaus and dispute the erroneous items. If your credit score is 600 or below, take some time to rebuild the score before applying for an auto loan.
2. Steady flow of income:
Another important factor to qualify for an auto loan with bad credit is your monthly income. Remember, in order to get a car loan with bad credit, you need to have a steady flow of income. The higher your income is, the better the chances to get a loan with poor credit. Even if you have a bad credit history, lenders will willingly approve your loan application provided you have a high monthly income or can make considerable amount of down payment. Since monthly income is an important factor to get approval for car loan, include all the sources of your income, such as income from your job, investment, and a paper route. You may also consider earning some extra amount in order to increase your monthly income.
3. Monthly housing payment vs. monthly income:
Another interesting factor for auto loan qualification with bad credit is the ratio of your monthly housing payment vs. total monthly income. For instance, if your monthly housing payment is $300 and your monthly income is $1200, then the ratio of your housing payment vs. income is 25%. Lenders accept a ratio of upto 35%, but anything over 40% will require you making a down payment or a cosigner. So while acquiring a car loan with bad credit, only claim your share of house or mortgage. For example, if the house rent is $600 and you have two roommates to equally share the cost with you, then you should only show $200 on your application as monthly housing cost. The same goes for a mortgage that you share with your partner or spouse.
4. Make a down payment:
You may impress the lender by making a down payment so as to get qualified for a car loan. Some lenders require you making down payment as little as $199 or so while acquiring the car loan. But if you can make a higher down payment, your car loan approval is guaranteed. So make a higher payment down and get qualified for car loan.
In conclusion, bear the above mentioned guidelines in mind in order to qualify for a car loan with bad credit.