How Large of a Car Loan Can I Get?

Get Car Financing
Even with poor credit.

By

Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


, Contributing Writer - October 11, 2018

When you have bad credit, subprime lenders determine how much of a car loan you can get approved for. They base how large of an auto loan you can get on many different factors, but your income, credit score, debt to income ratio, and payment to income ratio are the largest influencers. Customers with bad credit scores can get approved for up to a $20,000 to $35,000 auto loan, but the amount depends on those other factors.

How Much Car Loan Can I Get?

The process of financing a car with bad credit is different than traditional lending. The obvious problem is that most banks and other auto lenders don't approve borrowers with bad credit. This leaves borrowers with bad credit needing to seek alternative options, such as special finance dealerships.

Dealers that work with borrowers with bad credit are signed up with subprime lenders, who are willing to finance these car buyers who would otherwise be out of luck. The reason subprime lenders are more understanding is because they have loan programs specifically designed for borrowers with bad credit – though they do carry stricter qualifications in order to get approved.

These requirements influence how much car loan you can get, as well as every other factor associated with your loan – like your interest rate and down payment requirement. Essentially, these lenders take a careful look at your credit and your income to decide if you can get approved, and how much you can get approved for. For example, subprime lender Consumer Portfolio Services offers auto loans of up to $20,000 to $35,000 to consumers with bad credit looking to buy a new or used car, but how much they can get depends on other factors.

Here are the main factors lenders use to determine how large of a car loan you can get:

  • Credit Score: While subprime lenders look to other factors to approve bad credit car buyers, they still look at your credit score. While it varies, there is a minimum credit score requirement to qualify. Additionally, your credit score influences all of the other terms available to you, with more flexibility being offered to buyers with better credit. With all else being equal, the better your credit score, the larger the car loan you can get.
  • Income: Subprime lenders typically have a minimum income requirement of $1,500 to $2,000 a month before taxes. However, borrowers that make more are generally able to get approved for larger amounts. These lenders approve people based on what they can afford to pay.
  • Debt to Income Ratio: This is the percentage of your monthly income that goes toward bills, which is found by adding up all of your monthly bill payments and dividing the total by your pre-tax monthly income. Subprime lenders may deny your application if your debt to income ratio is higher than 45 to 50 percent. This calculation gives lenders an even better idea of what you can afford, which is why it plays a role in the size of loan you can get.
  • Payment to Income Ratio: This is a calculation lenders use to set the maximum monthly payment you're allowed, which is found by adding an estimated monthly car and insurance payment and dividing the total by your pre-tax monthly income. In most cases, subprime lenders don’t approve borrowers with a payment to income ratio greater than 15 to 20 percent. This is yet another bad credit auto financing requirement to help lenders and borrowers make sure the loan fits their budget.

Get an Estimate for Your Car Loan Amount

You can use the factors subprime lenders use to figure out how much car loan you can get. You can use your pre-tax monthly income to determine the price range of vehicle you need to shop for if you want to get approved with a subprime lender.

Start by taking your monthly income and calculate your payment to income ratio. For example, if you make $2,400 a month, you can multiply 2,400 by 0.15 (or 15 percent) and 0.20 (20 percent) to get a realistic car payment range.

  • 2,400 x 0.15 = $360
  • 2,400 x 0.20 = $480

Remember that subprime lenders factor auto insurance into your payment to income ratio. In most cases, they estimate $100 for it. This brings the realistic range for the amount of your monthly car payment to $260 to $380.

However, in order to get a realistic idea of how much of a car loan you can get, you also need to account for interest charges, your down payment amount, and the others costs of financing a vehicle. Our Car Loan Calculator can provide you an estimate of the maximum amount you can finance after you punch in your desired monthly payment, expected down payment, approximate credit rating, desired loan term, and sales tax.

If you use a car loan calculator and tried to get a loan amount that results in a $380 maximum monthly payment, you can work backward to get a better idea of how large of a car loan you can get. We used an interest rate of 15 percent, a down payment of 10 percent, and a loan term of 60 months (five years), and found that a $17,400 loan resulted in a $378.26 monthly payment. A car loan for that amount would be close to the maximum amount a lender would finance if they accept a 20 percent payment to income ratio.

The Bottom Line

Knowing the factors lenders use to determine the size of your car loan can work to your advantage. Knowing where to go when you're ready to apply for an auto loan with bad credit is another way to get started on the right foot.

CarsDirect wants to make the process of finding auto financing faster and easier. We work with dealerships all across the country that specialize in helping car buyers dealing with less than perfect credit. We'll work to connect you with a local dealer if you submit our free and secure car loan request form.

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, Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


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