As you would expect, it’s easy to apply for a bad credit auto loan. Simply fill the application out and wait, right? Actually, there is a lot more to making the best choice for saving the most amount of money possible and taking the right steps to reconstruct your credit score. This is your ultimate guide on pre-qualifying for a bad credit auto loan and making the most informed choice possible in the process.
What is a Bad Credit Car Loan?
A bad credit car loan is a particular type of car loan designed for people with poor credit histories. A credit score is often deemed being “bad” or “poor” when the FICO score falls under 640. Individuals that have credit scores that lie under 640 are automatically labeled by many lenders as being highly risky to deal with, and therefore, it is hard for them to find loans or lines of credit.
When a person with a bad credit score cannot find a lender to assist them with financial moves such as purchasing cars or buying homes, they are left to their own devices in many cases; one of which being taking advantage of bad credit car loans. In some cases, dealers, lenders, and financing companies might approve a loan for an individual with bad credit, but these types of loans usually come along with incredibly high interest rates to protect against a default.
To make sure you’re on the right page, consider obtaining a free copy of your credit report to get an idea of where you stand financially. Websites like AnnualCreditReport.com offer one free copy every twelve months for users. Before you apply for a loan with ValleyAutoLoans.com, be sure to look over your credit report for accuracy and any discrepancies so that you are not assessed against incorrect information or old, nonexistent accounts.
What are the Requirements to Apply for a Bad Credit Car Loan?
While requirements differ from lender to lender, there are general requirements that ValleyAutoLoans.com has in place for applicants. These requirements entail:
- At least 18 years of age
- Currently lives in Canada or US, and is a legal citizen
- Guaranteed employment (full time or fixed) with at least a gross income of $1,500/month ($1,800/month suggested)
Gross income is the amount that you make per paycheck before it is taxed. To stay on the safe side, we require that all applicants verify and confirm their income by showing record of past tax documents. Of course, incomes such as child support, social security, alimony, or disability insurance should be included as well.
To ensure that all of our approved applicants will be able to make payments on their car loans, we cannot accept individuals that hold seasonal positions or have been at a temporary job for less than 6 months.
What are the Degrees of Bad Credit
It’s to be understood that while one lender might see your credit score of 580 as being unacceptable for receiving a car loan, another might consider it to meet the requirements of their loan. Look at the table below to determine where you fall in terms of credit. ValleyAutoLoands.com uses this information to determine many factors that play into your bad credit car loan.
1. Decent | 625-600
2. Average | 600-575
3. Below Average | 575-550
4. Semi-Poor | 550-525
5. Poor | 525-500
6. Bad | 500-450
7. Awful | 450-425
8. Terrible | 425-400
When analyzing each bad credit car loan application at ValleyAutoLoans.com, not every credit score is viewed in the same light. For example, a credit score of 575 is not automatically looked at and deemed to be unsatisfactory. In actuality, the credit history is examined along with the score in order to find out exactly what happened to generate that number.
In an effort to more look at each applicant with a unbiased eye, his/her questionable credit history will be examined to determine whether it is habitual or situational.
A habitual bad credit score is reflected when an individual’s history is filled with maxed out credit card balances, defaults on payments to various accounts, frequent changes in jobs, and low income. On the other hand, a situational bad credit history might unveil that an individual has kept a high-paying job for quite a long time and has diligently made payments on all credit accounts until an unexpected financial emergency springs up. In this case, the person with a situational bad credit score would likely be perceived as less of a risk to deal with financially, even though these two people technically have the same credit score.
Common traits of a habitual bad credit history include multiple outstanding balances, bankruptcies, and delinquent on the present accounts. Common traits of a situational bad credit history include sudden loss of job, divorce, a medical emergency, illness, etc.
What is the Process for Applying for a Bad Credit Auto Loan?
The bad credit auto loan process starts as soon as you apply for one. After completing an application and submitting it, VallyAutoLoans.com will begin the search in a vast network of lenders and financing groups for a dealership that provides options for your particular case. One bad credit lender might be willing to lend money to an individual that has a car repossession in their history, while another might consider it too high of a risk.
This is why using services like VallyAutoLoans.com to search a diverse database for lenders that meet your needs is the best route to go. Because the network spans over such a long distance and contains so many dealers, it’s easy to find a match for any applicant, regardless of his/her credit situation. When the dealership is found for the applicant, they are then free to contact him/her about vehicle options. The vehicles available and the terms of the loan agreement will depend heavily on the dealership.
It might seem a little odd; selecting the dealership before you get to even see what’s on the lot. However, it’s easier to track down a dealership that works with applicants with bad credit rather than choosing a car and hoping that the dealership will offer options for those with bad credit. In this situation, it’s better to wait to get that dream car after you’ve gotten your credit in order.
Tips for Using Bad Credit Car Loans
It’s likely that you’ll eventually want to be able to cruise any dealership lot of your choosing without having to worry about being turned away because of your credit score. Bad credit car loans from ValleyAutoLoans.com can help make that a reality!
Lenders will begin reporting your payments to credit bureaus, and because of that, it won’t be long before you start seeing some positive change with your credit rating.
Always keep in mind that certain lenders are not interested in reporting your positive payment history to credit bureaus. After all, why would morally corrupt lenders want to do that if all it will do is make your interest rates plummet? Do a bit of research before you decide to work with a lender that might have this old trick up its sleeve.
Additionally, if there’s a vehicle that you have your eye on that’s just out of your financial reach, consider making a bigger down payment. A bigger down payment sends a more bold message to the lender that you are more serious about the vehicle, and they have more of your money in hand for security down the line if you default on payments or sustain a repossession entirely. You can put anywhere from a small percentage to nearly half the vehicle’s worth down. This strategy is most useful for those that suffer from a situational credit history and want to make a point that they are financially responsible.
Find a co-signer for your loan as well. Finding a co-signer can be a bit of a challenge because not only does it mean that you have to locate someone with good credit, but that person also has to be willing to take a financial risk on you. If you manage to find someone that is willing to co-sign, take advantage of it. It can save you thousands of dollars on the loan (sometimes to the tune of $100 less a month), and it will likely shorten the time needed to begin working with traditional lenders again.
If you’ve ran out of options for finding a lender to work with you on getting a car, the time is now to apply with ValleyAutoLoans.com. You aren’t going to find any other organization that will face you up with countless dealerships and help you narrow down the perfect one to work with, according to your needs and credit situation. Save yourself the time and hassle of getting involved with the wrong lender, and apply with ValleyAutoLoans.com today for a personalized loan and consultation.