Car Loans for Low Income Earners and Bad Credit
Do your kids feel embarrassed every day when you drop them off to school due to the strange noises your jalopy produces? Perhaps you experience awkward moments when a colleague asks for a ride because you don’t want them to know that you have to push your car to start it. No matter how early you wake up, your car always seems to develop new mechanical problems. Today, you’ll learn how to get car financing for low income earners from Complete Auto Loans.
1. 6 frequently asked questions about car finance for low income earners
1. Are auto loans for low income legit?
Borrowers who don’t meet banks’ car loan requirements sometimes get car dealership financing. One advantage of this approach is you don’t have to worry about credit checks. However, car dealership financing has expensive APRs and high down payments. In addition, you have to pay high monthly installments ranging from $500.
The good news is that the CFPB allows credit lenders to provide low income loans for cars. Complete Auto Loans works with a legit pool of lenders who ensure that your auto loan earns you credit score improvements. You even get to meet the team of credit officers and financial coaches for consultation.
2. What is the minimum income for a car loan?
You need a monthly gross income of $2,000 to qualify for a car loan program for low income earners. Some creditors set their minimum at $1,500 in order to attract college students. A car buyer who earns within this range can commit at least 20-25 % of their monthly income towards car expenses and still pay other bills on time.
Your financer will also look at your bank statements to see how many debts you repay every month. Car buyers with several debts have challenges in getting auto loan financing because they have bad debt-to-income ratios.
3. Are there car loans for students with low income?
The good news is that Complete Auto Loans helps college students with low income get legit auto loans. As a student, you get an affordable decent car to get you to class and work on time as well as improve your credit rating. If you take time to look for a good deal, you’ll get high quality cars by finding car dealers selling motor vehicles with extended warranties.
In order to get the best interest rate, make sure you have an average credit score. Even though creditors provide financing to buyers with poor credit scores, the high-interest rates are discouraging to a first-time car buyer.
4. Are car loan programs for low income earners risky?
The truth about auto financing for low income buyers is it consists of high APRs. Why? Because most buyers looking for this type of financing also have subprime credit scores. Some buyers feel threatened because one has to pay the costly loan installments on time. The high down payment requirement also scares off potential buyers who were looking for no money down car loans.
Car loan programs for low income earners don’t put you in any financial risks because you pay interest rates within the CFPB’s recommended range. Plus, as long as you avoid taking several debts, you’ll have enough net income to pay your car loan installments on time.
5. Can I refinance a car loan for a low income earner?
Yes, you can. In fact, car loan lenders provide refinancing to their customers due to a couple of reasons. A debtor experiencing temporary financial challenges can still retain their car because refinancing lowers each monthly installment. Second, credit lenders hate doing repossessions because it’s costly and affects the buyer’s credit score.
When should you get refinancing? When interest rates drop significantly. One benefit of refinancing is that you retain the payment history on your current car loan. Plus, your credit score remains intact. Creditors don’t allow buyers to refinance their loans for the second time.
6. Can I get a car loan for low income with bad credit?
Yes, you can, however, you should know that creditors set their own bad credit requirements. For instance, limiting your choice to cars within a specified price range. You’ll also agree to high APRs and delays attract high late payment fines.
A buyer in need of this type of financing also has to present a long history of employment. The creditor needs these bank statements and paychecks to assess a borrower’s financial health. If you don’t need a new car urgently, you can avoid these hassles by taking time to build an excellent credit score.
2. What are the advantages of car loan programs for low income buyers?
1. Enables you to enjoy private transportation
If you live several miles from college, then you understand how challenging it is to get to school on time every day. It gets worse when it rains because everything seems to stop at once. Traffic jams can last for several hours yet you need to get home on time to do your assignments and prepare for the next day’s lessons.
Applying for a car loan for low income buyers will improve your life tremendously. You’ll use the best routes to get to school on time. If you have children, you can get them to school early and still get to college on time.
2. Pay affordable monthly installments
In order to qualify for a subprime auto loan, one has to have a high net income because this financing has a high-interest rate. On the other hand, low income car loans are designed to help people with part-time jobs or startups maintain consistent payment histories.
As a college student, you can rely on your current employment to pay your affordable loan and insurance monthly payments without requiring financial assistance from your parents. If you have a few thousands of dollars stashed in your savings account and need a car urgently, you’ll easily secure this type of financing since you can pay the down payment up front.
3. Enables you to make tremendous improvements in your credit score
Do you hate your current credit score? Well, you can raise it significantly by taking this car loan. Why? because your payment history appears in credit reference bureaus. According to FICO, payment history accounts for 35% of your personal credit score.
Building a good payment history works in your favor when applying for future auto loans. If you’ve just come out from debt settlement or bankruptcy, applying for a low income auto loan enables you to rebuild your damaged credit ratings fast.
3. What are the requirements for a low income car loan?
1. Proof of identification
Carry your original driving license and some photocopies to the dealership. You’ll also submit your SSN for identity confirmation. If you previously owned a car, the creditor expects your auto insurance report. Foreigners will submit their alien registration numbers and passport photocopies.
2. Credit report and bank statements
Car loan providers use debtors’ credit histories to obtain automotive credit reports from FICO. An automotive credit report shows your history with previous car loans. It shows your credit ratings for the past two years. A potential credit lender can see how many auto loans you paid through debt consolidation or settlement plans.
This report also shows how many repossessions you’ve had plus any outstanding car loan payments. FICO also provides an automotive credit score index that ranges from 350-850. An ideal driver has an automotive credit score that’s within 615-684. If you’re a first-time car buyer, your score ranges from 315-514.
Your cosigner should have an excellent credit score to convince your creditor that he or she can take over the debt and clear it on time. Creditors also have a minimum net income requirement for cosigners as a way of ensuring the outstanding balance doesn’t turn in to a bad debt.
Avoid seeking for cosigners at the last minute. Some of the people you ask might assume that you also want them to contribute towards the down payment. So, they hesitate because no one wants unexpected financial responsibilities. Approach a potential cosigner after you’ve saved half of the required deposit in order to convince them of your commitment towards repaying your auto loan on time.
4. These tips will help you qualify for a car loan with low income
1. Be honest in your loan application form
Perhaps you just got a job but you feel that being honest about your employment duration will hinder you from obtaining car financing for low income buyers. Creditors usually verify the information you’ve provided by making phone calls. That’s why you should provide honest answers to enhance your credibility.
During periods of low sales, some business owners don’t see the need for banking their sales revenue. Avoid this mistake because you need to present copies of your bank statement to prove that you meet the minimum gross monthly income. Credit lenders reject applicants with inconsistent bank statements. Make sure you fill in all the blanks provided. If you’ve ever faced bankruptcy, make sure you tick the respective box.
2. Prepare a 50% down payment
Credit lenders are wary of doing business with debtors turned down by banks and credit unions. In order to minimize bad debts, customers in need of car loans for low income earners have to pay high cash deposits up front. If you’re planning to buy a car that costs $10,000 you need to save $5,000.
Paying your down payment on the spot creates a good impression on your creditor. Plus, it saves you from the embarrassment of borrowing money here and there. When you pay 50% up front, you also reduce your monthly installments.
3. Improve your debt to income ratio
Debt-to-income ratio refers to the percentage of your total debts in comparison to your gross monthly income. Financial experts recommend maintaining it above 43% in order to meet your needs while repaying debt installments on time. If you earn $2,000 as gross monthly income, your total debts shouldn’t exceed $800.
Start by paying off your outstanding bank and payday loans. Avoid applying for any form of credit before getting your auto loan in order to maintain your newly improved debt-to-income ratio.
4. Choose an affordable car
As much as you want a decent car, you also have to check whether it matches your budget. After driving off from the parking lot, your first stop should be at the insurance provider. A luxury model attracts high insurance premiums.
If you want to spend less than $500 a month on auto loan installments, choose a modest car. If you earn a net income of $2,000, you’ll have enough to fuel it on a daily basis. Plus, you can minimize interest payments by choosing the lowest repayment period available. Doing this boosts your automotive credit score.
5. Buy the car at the end of the month
Car dealerships record increased sales during end months because employees receive their paychecks on the third and fourth weeks. You’ll notice several discount promotions that help you to get better value for money. This is one of the best times of the year to get the car you want at a better price.
6. Bottom line
Car loan programs for low income earners are necessary because college students need them to own their first cars. The fact that you can pay less than $500 dollars on monthly payments makes it affordable for single parents or individuals who are switching careers and haven’t yet found a stable source of income.
Complete Auto Loans will help you get a good car loan by providing a free consultation with a team of experienced credit lenders. Feel free to make a call or visit our offices for consultation.
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