Tuesday, November 27, 2012

Car Loans With Bad Credit: How Your Application Can Prevail


The challenge of securing a loan when bad credit is a part of the equation can be quite major, but with the right approach, the chances of securing car loans with bad credit are improved quite dramatically. It is simply a matter of focusing on the key points in your application.

Like every kind of loan, securing loan approval comes down to meeting the required criteria, or ticking all of the necessary boxes. It does not actually have much to do with bad credit scores, so even those with very poor credit histories can still get the financing they need to buy the automobile they have had their eye on.

Still, that is not to say that everything is simple. Some effort needs to be made to find the right deal, and ensure the best terms possible. That way, the car loan secured will not cost the earth.

Offer Some Security

The purpose of offering some security is to ensure that the lender has a source of compensation should the borrower default on the loan. The benefit is that the risk factor is lessened so lenders charge less in interest, so it is a highly valuable tactic when seeking car loans with bad credit.

Of course, the security that is offered when buying a car is the car itself. Other loans, like personal loans, require applicants to come up with something that matches the value of the sum borrowed, if there is to be any chance of securing loan approval. In many cases, the demand for security starts at loans of $3,000 and upwards.

The lower interest rate charged can mean good savings are made. However, keep in mind that if repayments are missed, then the item provided as security will be lost. With a car loan, that means the car purchased will be lost.

Sidestepping the Bankruptcy Issue

Lenders have quite strict attitudes towards bankruptcy rulings, but they are not so strict as to prevent securing something like a car loan with bad credit. The only real condition is that the declaration of bankruptcy did not occur in the previous 12 months. Any time after that is usually overlooked, or the significance is lessened at least.

It is possible to void the stress if applicants simply take note of the date bankruptcy was declared. This information is available in your credit report, so your timing can be improved enough to help in securing loan approval if you take time to read yours.

Once the 12 month-mark is passed, then the application process can begin. However, it is a good idea to find out the specific policies that lenders may have before submitting any application to them for a car loan.

Having a Reliable Source of Income

A key consideration for any application is the source of income that the applicant has. It needs to be reliable to get approval on any loan application, not just a car loan with bad credit, and so confirmation of employment and bank statements may be required. Be aware that there are some sources of income that are not deemed acceptable, such as pensions or disability payments.

Also, be aware that securing loan approval can only be achieved if the loan itself is affordable, so the degree of existing debt is a factor that is considered. The debt-to-income ratio states no more than 40% of income can be used in repaying loans, so any repayments above that figure means the car loan will be rejected.




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