Five Important Parts to Qualify For A Car Loan With Low Income
If your income is below average you know how hard it is to purchase a good quality car. With car prices rising it can seem impossible to qualify for any low income car loans.
When it comes to choosing an auto loan lender, finding a car loan with affordable monthly payments is not always easy. The good news is Valley Auto Loans can do the low-income loan searching for you. With one application they will search their lending pool to find you reasonable car loans for low-income families. They can also find lenders that set up car refinance loans you can live with. Here are five important parts to qualifying for a car loan for low-income families. We want to help you know how to qualify for a low APR loan with bad credit.
1 Credit Score and Credit History
Your credit score carries the most weight when it comes to getting a low APR for your auto loan. If your credit score is not above average, the lender will look closer at your credit history. Your automotive credit report shows any car loans that you have had in the past. It also shows the consistency you have had to make your car payments as well as the lengths of previous loans.
If your low income is the only problem you have getting a loan and your credit history with past car loans is good, your automotive credit report will help your chances for a new loan.
Typical car financing lenders using an approval formula will not go below a credit score of 525 or less. If your credit score is between 500 and 575, you will need to use a bad credit auto loan lender. To find a lender that reports your auto loan credit history, you will have to shop around to find a good APR.
Typical money lenders
Lenders who offer bad credit car loans will charge a higher interest rate than a typical lending institution. By allowing them to report your credit, those bad credit lenders will help you in two crucial ways.
First, if you qualify with a subprime credit lender, over time you will get an improved credit score that will help any bad marks with past auto loans. Second, they can offer you a lower APR than the lenders who do not report your credit to the three credit burrows. This is because car dealers that offer their own financing such as “personal loans,” “no credit car loan,” “Buy Here Pay Here,” “Guaranteed financing” or “Tote Your Note” car dealers are taking a huge risk in lending money.
Car dealers who finance at the car lot will make sure it is worth the high risk auto loan. They are known for charging a large down payment and high interest so in the event you do not make your payments they will not lose as much money. Many times the cars they sell are so over priced that the car dealer cost is mostly paid for when you leave the lot.
Valley Auto Loans is a loan broker that can send your loan application to their financing lender pool to get you a fast, affordable car loan for bad credit and low income that will help you repair your credit rating.
2 Debt to Income Ratio
Lenders also compare your existing debt to the loan you are requesting to see if the loan will become burdensome to you over time. The way they do this is to look at the total cost of your monthly bills and debts and divide that by your total monthly income before taxes.
Lenders hope to see that your DTI (Debt to Income) ratio will not exceed 50 percent of your income.
In considering a loan approval, they will calculate your payment to income ratio by dividing your car loan payment by your gross monthly income to find your PTI (Payment to Income) ratio. Auto finance lenders will try to stay under 20 percent of your total income with your PTI.
When your credit score puts you in a situation to use a bad credit auto lender, your income requirements become a critical factor for qualifying for a car loan.
Many subprime credit car lenders will have a gross income criterion of around $2,000 per month. Valley Auto Loans has many lenders that will approve someone with a gross monthly income of $1,500 or more. If you can meet some simple, basic requirements, you can apply for their low-income auto loan program.
This is good news for low-income families needing a new car loan.
4 Time On Job
Another big plus is if you have worked at the same job or employer for a year or more. This shows that you have a stable and reliable income. If you have been employed for less than a year, then the lender will look to your past job history to see if you have had continuous employment for at least three consecutive years.
They will want to see that you have not changed employers more than three times in that period.
5 Down Payment
If your lender requires a down payment for your low-income car loan, you will probably get a lower APR, and your payments will be lower.
You can request a low-income car loan with no down payment. However, the loan program that you get will not be as good as someone who uses a down payment.
There are a wide variety of loan programs from Valley Auto Loans tailored to fit your need for low-income car loans.
Choosing a poor credit car loan lender can be easy!
There are a lot of poor credit lenders out there offering low-income car loans. However, you will find many will make you jump through hoops to qualify for their low-income family programs. Even then they only offer low income auto loans from their company only.
Using a car loan evaluation service like Valley Auto Loans will give you the ability to have your application viewed by many of our various lending agencies. Then you can qualify for a loan package that is set up to fit your financial needs.
You can review you loan offer in the privacy of your home. You are not obligated to accept any loan offer terms that you are not happy with. Even a first time car buyer can find great car loans for bad credit and low income.
So, how to get a car loan with low income? Here are some helpful tips.
Tips For Getting A Quality Low Income Car Loan
Tip 1- Know Your Credit Worthiness
Check your credit score and your credit rating history. Make a note of anything you think is incorrect or should have been resolved and call your creditors to have corrections made to your report.
You can find a FREE credit report from Valley Auto Loans.
Knowing your true credit score will keep you from being taken advantage of by a car dealer who is trying to put you in a higher APR bracket. It will also give you an idea of what type of lender you will need to apply to for the right auto loan.
However, if you need to make corrections, hold off on applying for a car loan until your credit score shows the corrections. In doing this, you will save hundreds of dollars in interest charges when you do apply.
Tip 2- Do Some Competitive Car Shopping
Anyone with good credit will get a fairly good APR for their car loan and will probably take the first car deal that comes along. Someone with bad credit and low income cannot do much about the high APR but with a little work you can get a lower payment.
You do this by finding a great car deal with a low selling price. The lower sticker price can compensate for the higher interest rate you may have to pay.
Do some research on finding a great used car or read up on new car buying guides to learn how to haggle with car salespeople for a lower price.
Tip 3- Do Not Leave Any Loan Application Fields Blank
Know what the lender is looking for with car loans for low income and give them all your information completely. List employers phone numbers and all of your income including child support and other forms of income that can be documented.
Tip 4- Know Your Budget and What Your Monthly Payments Can Be
This is where a car payment calculator can come in handy. A car payment calculator is easy to use and will give you a good estimate of what your payments will be. When you add different down payment amounts and loan terms, you will see how they affect the monthly payment amount.
This is also a good time to start a simple monthly budget if you have never had one. Valley Auto Loans can show you how to get a car loan with low income by using a simple monthly budget. It is designed to help you save a down payment and pay your bills with money to spare. Spare? Yes, a free check every couple of months to spend as you need.
Tip 5- Use a Down Payment and Make It As Large As Possible
20 percent is recommended but do as much as you can and don’t fall for one of those “No Money Down” loans. A no money down loan will give you one of the highest monthly payment loans you can get. Remember the goal here is to get a great loan with the lowest monthly payment you can get.
Tip 6- Choose a Car Wisely
Remember finding a low sticker price is a critical factor if you are looking for car loans for bad credit and low income. It is the easiest way to get a low monthly payment, so keep your car choices simple.
Find a car that is economical and dependable. That category usually falls on compact, entry level cars that provide good transportation without all the luxuries and add-ons that drive the sticker price up. Choosing the right cars for low income auto loans will help you get more car for less money.