If you have bad credit, there's a very good chance you can still get approved for an auto loan. There are lenders out there willing to look at factors beyond your credit score in order to work with you. However, these special finance lenders still have certain requirements that you must meet in order to qualify.
While specific requirements can vary from lender to lender, there are some general guidelines for all bad credit auto loan applicants. So if you're planning to apply for subprime financing in the near future, it's possible to know ahead of time whether or not you might be eligible. You can also make the approval process go faster by having the necessary documents prepared.
Bad Credit Auto Loan Requirements Checklist
Normally, when you apply for a bad credit auto loan, you will need to provide proof of the following:
- A Gross Monthly Income of at Least $1,500: A lender will need to know that you can comfortably make your car payments. Also, it is preferred that this pre-tax income is regular and garnishable. However, if your primary source of income is from disability benefits or if you have seasonal employment, some lenders may still be able to work with your situation.
- A Valid Driver's License: By valid, it is understood that your license has not expired or been revoked. Also, your current address must be on the license as well as your correct name. If you do not currently have a valid driver's license, you will need to obtain one before applying for a bad credit auto loan.
- A Permanent Mailing Address: This means that you have to maintain a stable residence. Whether you rent or own, you'll need to prove that there is a single location that you call home. The best way to verify your residence is through a utility bill that is addressed to you.
- A Phone: You must have either a landline at your listed address or a cell phone (on contract with a nationwide company) in your name at the address listed on your loan application.
You must also be a U.S.citizen or legal resident who is at least 18 years of age. And while these are the basic requirements for a bad credit auto loan, there are additional factors that a lender will consider.
Other Factors Considered by Special Finance Lenders
When making an approval decision, there are certain things that lenders like to see in a bad credit applicant. If the following applies to you, there is a very good chance that you will be approved for an auto loan.
- You've lived in the same place for at least six months. This shows stability and makes you less of a lending risk. And if you own your home, that’s even better. But keep in mind that most lenders will understand if you've recently relocated for a job opportunity.
- You've had the same employer for a year or more. Again, stability is very important in the eyes of a lender. As far as your job goes, if you’ve been with the same company for a while, your income is more stable. However, if you've switched jobs but have remained in the same line of work for a long time, you're still in good position.
- You're able to provide a down payment. Having a large down payment is helpful even for car buyers with good credit. And for a customer with bad credit, putting cash up front on a vehicle purchase can make a big difference. A down payment will reduce the size of the loan and decrease risk to the lender. This alone may increase your ability to be approved. Also, your willingness to invest your own money will show the lender that you're committed as a borrower.
Again, every lender is different, so don't get discouraged if it doesn't seem like you meet every single requirement or decision factor. No matter what your situation looks like, there may be a lender out there that can approve you for a bad credit auto loan.
The Easiest Way to Buy a Car with Bad Credit
At CarsDirect, we've partnered with the best car loan providers for consumers with bad credit. So applying with us will give you your best chance at auto financing approval. Go ahead and fill out our simple and secure online application to get started today.