To get approved for car financing, you need to meet the minimum requirements set by a lender. These requirements will not determine how much you will end up paying for the loan. They are just primary filters for people who wish to apply for car loans. Every lending company has its own set of requirements. The requirements may differ from those of another company. However, there are some general requirements that are found across all or most lenders.
Common Car financing Requirements
To begin, you must be over 18 years to apply for a bad credit car loan. Most lenders will ask for your social security number or state identification document to prove you are of age. The information on the identification document will be independently verified before your application can be approved.
You must also show that you will be able to pay back the auto loan. Therefore, you must be employed and be making a minimum of $1200 per month. Some lenders will require higher minimums, sometimes up to $1800 per month. By going through the requirements of different lenders, you can find a company that will finance you at your current income level.
Another common condition for applying for car financing is that you must not have had repossession during the past one year. Repossession usually tarnishes your credit score and shows that you are not financially stable. Most lenders will not finance you if your finances are is a poor state. To get a car loan after repossession, you will have to approach subprime lenders.
Employment and Residential Stability
Apart from the above requirements, the car financing lender will consider your employment history to assess the risk of financing you. Holding a job over a long period of time usually indicates employment stability and this means you are likely to pay back your loans. If you have been moving from job to job over the years, you will be regarded as having an unstable employment record and the lender may need to scrutinize your application more before approving your loan. However, moving from job to job in the same industry, perhaps due to promotion or after increasing your education, is a good thing and will give you a better employment stability score.
The lender will also want to know whether you own a home or live in a rental and the neighborhood where you live. This information helps to determine how much rent you pay (if you are a tenant) or the value of your home (if you are a homeowner). Borrowers who own homes are usually favored by lenders as they are considered more stable and able to pay back car financing than borrowers who are tenants. However, there is no discrimination on financing based on whether you are a tenant or a homeowner. The information is used by the lender to assess your risks of not paying back a car loan you may be given. In most cases, borrowers who are homeowners are usually charged lower interest rates than those who are tenants.