Like many people on the market for a new or used car, you may have less than perfect credit. Therefore, odds are that the only way that you will be able to obtain financing for your car purchase is to obtain financing from a lender that provides bad credit car loans.
If you are contemplating applying to obtain this type of financing, you may be wondering what the general requirements are for bad credit car loans. Through this article, you are provided an overview of the basic requirements that are associated with bad credit car loans.
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The Tightening of the Bad Credit Car Loan Market
One factor that you do need to keep in mind when it comes to bad credit car loans at this juncture in time is that this segment of the lending market is tightening. As a response to what is happening in regard to home mortgage loans and in regard to what is occurring in regard to the economy more generally, lenders and financial institutions are becoming stricter in the manner in which they are going about approving bad credit car loans.
Understanding that it is now more difficult to obtain bad credit car loans than it was even a year ago, it really is important that you cover all of your bases if you do intend to make application for this type of financing.
Proving a Reliable Income
Perhaps the most important thing that you are going to have to demonstrate to a lender that specializes in bad credit car loans is that you have a reliable income. Reliable income is comprised of two factors: First, you will need to demonstrate that your income is at a certain minimum level. Second, you will need to demonstrate that you not only have had income at this level for an extended period of time but that you have been gainfully employed for that same period of time. In many instances, gainfully employed for the purposes of bad credit car loans means that you actually have had the same employer for that extended period of time.
Keeping Accounts Current
The next element involved in qualifying for bad credit car loans is to make sure that any open and current credit or revolving accounts or loans that you have are current. In regard to these accounts and loans being current, you will generally want to make sure that these accounts have been current for at least six months before you actually make application for bad credit car loans.
Lowering Your Debt Level
Before you make application for bad credit car loans, you will want to lower your existing debt as much as possible. For example, if you have credit cards, you will want to lower the outstanding balance as much as possible on these accounts.
When it comes to approving bad credit car loans a lender will consider what is known as your debt to income ratio. This is a comparison of your outstanding debt to the amount of money you have coming in to pay that debt. You want this debt to income ratio to be as low as possible before you make application for bad credit car loans.
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