Five requirements for bad credit auto loans

There are a number of things you should consider if you are looking for bad credit auto financing. First of all, unlike a traditional car loan, bad credit auto loans have a number of basic requirements that must be met in order for you to qualify. There are always minimum requirements that are required by lenders for bad credit, car loans. These requirements include income, age, citizenship, employment status, status of bankruptcy filings, and vehicle repossessions.

  1. Income. The first bad credit, car loan requirement has to do with income. For most auto loans with bad credit, the lender will require a minimum monthly W-2 (regular employee) income of at least $1,500 to $1,600 per month if your credit score is below 640. And $2,000 is better. The reason for this requirement is that it addresses your gross income… meaning that the amount you are paid before withholding, Medicare and social security taxes are taken out. Lenders generally require this standard minimum income so that they can be sure you can afford a car payment and full coverage car insurance in addition to your other bills.
    For the most part, the bad credit car loan income requirements are for W-2 employees. This means that your employer supplies you with a W-2 income statement at the end of each year that reflects the wages you were paid. If you receive a 1099 form, meaning that you are an independent contractor or self-employed, the situation becomes much more complicated. Unfortunately, due to current economic conditions, most bad credit lenders will not accept anything other than W-2 employees for bad credit, car loans. Lenders that may consider self-employment income will generally only do so with three previous years of income tax statements that have been prepared in a professional fashion. In fact, you may even be required to supply the lender with bank statements in order to support your stated income.
  2. Employment Status. The next requirement for bad credit, auto loans is your employment status. As a general rule of thumb, most bad credit lenders will require at least one full year with your current employer. This is in addition to an additional two years of verifiable employment history. The reason for this is that a stable employment history means that a person is more likely to repay the loan. So, if you are new to a job, and you can hold out for a while, get at least six months under your belt on that job before you apply for a car loan.
  3. Citizenship and age. A third requirement for auto loans with bad credit is your age and citizenship status. All bad credit car loan applicants must be at least 18 years old and U.S. citizens. There are virtually no exceptions to these two rules. If you are under 18, typically a cosigner will be required.
  4. Bankruptcy status. The fourth requirement has to do with the current status of any bankruptcy filings that you may have on your record. As a general rule, most lenders will require that all Chapter 7 bankruptcies be discharged before a bad credit, car loan will be considered. However, there are exceptions to this case. If you are currently in a Chapter 13, you must be able to obtain an order to incur additional debt through the court that is overseeing the bankruptcy. This is accomplished through a trustee. But, you should also be aware of the fact that in the current economic state, most lenders have very little interest in applicants that are in a current, open Chapter 13 bankruptcy.
  5. Vehicle repossessions. The last requirement of car loans for people with bad credit has to do with how many, if any, vehicle repossessions the person has had. For obvious reasons, lenders care about their “investment” in you as a borrower. Because of this, they will look at any and all repossessions in your credit history. If you have any within the past year, it must be included in a bankruptcy. Note that this includes both voluntary and involuntary repossessions. If you have a repossession that has occurred before or after your bankruptcy, you will simply rarely qualify for any kind of car loan unless it’s a “buy here pay here” car lot or “tote the note” dealership.

These are five of the basic requirements you will typically need to meet in order to qualify for a bad credit car loan. If you have any more questions, go to Federal Auto Loan, where we have an entire Car Loan Resource and Auto Loan Learning Center devoted to providing you with information on bad credit auto loans. Further, we also have an SSL-encrypted car loan form application that you can fill out from the privacy and security of your own home. We have helped thousands of qualified and bad credit applicants obtain reliable transportation and a quality auto loan. Further, by making regular payments and paying your auto loan off in a timely fashion, you can help to reestablish your credit at the same time!

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