There are a number of things that need to be understood about bad credit auto loan apply, especially if you have gotten a regular car loan in the past and don’t understand the special finance process. Here are some of the differences:
Once you have submitted your bad credit auto loan apply application and have received an approval, the bank will determine your car budget. Guidelines for a bad credit car loan apply are much stricter than for a regular car loan. When you submit a credit application, the bank looks very closely at your income and expenses. In fact, the bank requires you to prove your income with pay stubs that show year to date income. You may also be required to prove job tenure with a W-2 from a prior tax year. Additional income such as child support or disability needs to be verified with court documents, determination letters and bank statements.
If you are approved, the bank determines your income relative to your monthly debts (called debt to income or DTI); it factors in such things as utility payments and car insurance and comes up with a payment that it believes you can afford. The bank will then place you in one of their tiered programs based on your credit score and credit history. This program will dictate the interest rate, contract term and down payment requirements. This bad credit auto loan apply information will then be sent to the dealer.
Once the special finance department receives the loan information from the lender, the finance manager will determine which cars in the dealer’s inventory fit the approval requirements. With most banks, the newer the car and the lower the mileage, the longer the loan term the lender will allow. So as you can see, the selection process is not as simple as it might seem.
The bad credit auto loans apply is also different from the customer’s perspective. Most customers that have not financed a car with a subprime lender choose a car based on what they like – color, model or type. It could be a 5 year old sport utility vehicle with 70,000 miles on the odometer. Even though this particular vehicle may be clean and drive nicely, the interest will be higher due to its age, and a service contract (which you’ll want, especially for an SUV) will also be more expensive. In addition, the term may also be shorter due to the mileage. In other words, it may look nice, but it also may not fit the payment call – unless the customer can come up with a sizeable down payment.
By understanding the buying process, a bad credit auto loan apply customer can avoid being disappointed by avoiding the wrong kind of car. Remember, the object is to get your credit back on track, not to get you your dream car. By sticking to the recommendations of the special finance manager and picking out the car that best fits your needs and not your wants or dreams, you will find that reestablishing your credit will be much easier and more affordable.
Tags: bad credit car loans