How Bad Credit Auto Loans Work

Did you know that people who apply for bad credit auto loans now have a much greater chance of getting through the entire car buying process? This wasn't always the case as the early parts of the recession made it impossible for individuals with poor credit ratings to meet the necessary requirements that were in place. In fact, the average credit for a car buyer to qualify for loans during 2010 was up to 779, which is a very good credit rating.


Unfortunately, there were not too many people walking around with those types of scores, and the need for bad credit auto financing programs were incredibly high. The good news is that as our economy has been slowly improving, so has the availability of car financing for poor credit scores. Statistics show that average credit rating for new and used autos dropped in 2012, as most buyers with credit scores close to  659  received used cars. On the other hand people close to a 760 credit rating or lower also found it much easier to finance new autos with bad credit.

So with bad credit auto loans on cars overly popular, anyone should be able to apply for financing and immediately get approved, right?

How to Get Car Loans with Bad Credit

Accepting lower scores is definitely a big step towards having an easier time being approved for a loan with bad credit, but it doesn't guarantee anything. As an applicant it's still very important that you provide the proper information and meet the necessary requirements to officially qualify. That means making sure you have an impressive debt-to-income ratio, proof of residency, no recent problems in your credit report, and on occasion a prepared down payment.

Why are these things important? Allow me to briefly explain.

DTI(Debt-to-Income)Ratio

A DTI proves to a dealer that your current monthly debt doesn't engulf your entire monthly gross before offering you a bad credit auto loan. It's important that people with very bad credit have the ability to make timely payments if you want financing.

Identification Requirements

In this day and age identity theft is a very serious crime committed, and more people are trying to finance a car with bad credit and no license. Therefore, by having a valid driver license with your current address you can solidify your identity and prove you're able to operate an automobile legally.

Recent Credit Issues

Having a bad credit report with very old offenses on it may not always hurt you; however, things like repossession, bankruptcy, or foreclosure in the last 12 months can be disastrous to your approval chances.

Auto Loans and Down Payments

There is a such thing as getting bad credit auto financing with no down payment, but placing money down can always help your chances of qualifying for a loan. The bigger your down payment the less likely you are to be denied by a lending company or dealer.

Overall the process of getting a bad credit auto loan is not difficult at all, but it can be made easier. Meeting the necessary requirements that are in place is one way to do this, and so is using the proper lender. If you need help in this area I advise you to visit autonetfinancial.com, which is a website that has been helping people with credit problems finance cars since 1997.