Subprime auto financing is different than conventional auto financing in a number of ways. One of the biggest differences is that there are certain basic requirements that must be met in order to qualify for a loan. Here is a basic background on those requirements:
The first of the basics is income. While there are a couple of banks that will consider your application with a $1,300 gross monthly income, most lenders will require that you have an income of at least $1,500 per month (gross) if your credit score is less than 640. Gross income, as you already may know, is the money that you earn before taxes are taken out of your check.
Even with a score higher than 640, the monthly gross income has to be close to this so that you can afford the car payment and full coverage auto insurance.
If you are self employed, the situation gets more complicated. Self employed individuals do not receive a W-2 wage and tax statement from their employers at the end of the year. Instead, the employer furnishes them with a 1099-MISC form. As a self-employed individual, you will need to prove income from the previous three years with income tax statements that have been professionally prepared. In some instances, lenders will require bank records in addition to these tax forms.
The second of the basics is bankruptcy. There are two types of bankruptcy – the Chapter 7 and the Chapter 13. All Chapter 7 bankruptcies must be discharged (there is the odd lender that may consider you if you’ve completed the 341 meeting of creditors prior to discharge, but this is very much the exception). If you are currently in a Chapter 13 bankruptcy, you will need to contact the trustee assigned to your case to request obtain an order to incur additional debt from the court. Without this order, no lender will consider you for subprime auto financing.
The next point that must be covered is repossessions. You cannot have any repossession within a year unless it was included in a bankruptcy. This includes any type of repossession - voluntary or involuntary.
The next point that will be covered is that of age. By law, you must be at least 18 years old to apply for a loan. Anyone younger than 18 years old cannot apply for a loan because they cannot legally enter into a contract.
Finally, you must have a 3 year job history with no more than 2 jobs during that 3 year time span. Also, you will need to provide the lender with proof of residency. This can be accomplished with utility bills that contain your name and your current address as well as a phone bill (land line or cell) with your name and your current address.
Tags: auto loan, Car Credit