Car Loans for People with Bad Credit Bankruptcy Auto Financing

Bad Credit Car Loans are a reality at Washington Auto Credit.

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Need a Bankruptcy Auto Loan?

Bankruptcy is not for everyone. Washington Auto Credit can help people with a bankruptcy get an auto loan. Bankruptcies are not the end of the world, just the end of a bad financial period in your life. Bankruptcy Auto Loans are sometimes easier get approved than other bad credit auto loans. If you have recently thought about a bankruptcy, but did not know who to talk to, click the link below and be matched with a bankruptcy professional in your area.

Free Bankruptcy Consultation - Act Now

Buy a Car with Bad Credit

The staff at WashingtonAutoCredit.com has been helping people obtain bad credit car loans for several years now. There are many people in tough financial situations trying to buy a vehicle, but most of those people do not know how to help themselves get their next car loan and start rebuilding their credit. Every situation is different, here are some general guidelines that might make buying a car with bad credit a little easier on you.

1. Know Your Finances

You want an affordable auto financing payment. The lender wants you to have an affordable car loan payment. What is an affordable car financing payment? That depends on lots of factors. If you have never had auto financing before, or have never had an car loan that did not end as a repossession,Washington Auto Credit strongly recommends you do not get a loan of more than $300-$400 per month. Every lender has different rules, but in the personal experience of the Washington Auto Credit staff, it is better to keep your first after bankruptcy car loan payment at or below this range. The bank will determine your maximum monthly payment by using a combination of three factors.

First, they will examine your Debt-to-Income (DTI) ratio. Your debt-to-income ratio is a way of calculating how much debt you have. Take your gross monthly income and multiply that number by the lender’s maximum DTI percentage (usually 40%-50%) the resulting dollar figure is how much monthly debt that lender will allow you to have, including your new car loan payment. To make sure you are under their limits, add up all of your monthly credit card payments, rent or mortgage payments, and other monthly debt that is not food or utility related. Congratulations, you have now calculated your monthly debt. As long as that number, plus your estimated car payment is under that 40-50% of your gross monthly income, you should not have a debt issue on your new auto loan.

Second, the auto finance lender will calculate your payment-to-income (PTI) ratio. If you make $5,000 per month, and have no other debt, you could qualify for up to a $2,500 per month car loan payment if a lender ONLY used a 50% debt-to-income ratio. To make sure that does not happen, auto finance lenders also will often limit your maximum payment with the PTI maximum. Take your gross monthly income, and multiply it by 15%-25%. The resulting range is what most auto lenders will use to help them determine your maximum payment. Different lenders use a different number with different credit grades.

Third, the auto lender will look for any previous auto loans you have had, the monthly payment of those auto loans, and how well those had been paid (on time, or not on time). Most car finance lenders have their own score card, and the policies vary from bank to bank, but if you have done a good job on previous auto loans, and you can afford it with your current income, the lenders will usually give you a fairly generous maximum payment. Conversely, if you have had car loans that were paid poorly in your past, the lender may decide to give you a lower maximum payment on this auto loan.

2. Be a Citizen

It sounds funny, but a lot of people do not leave much of a paper trail. Utility bills, lease agreements, cell phone bills, bank statements going to a physical address and not a PO Box, little things like that can make the difference whether or not your auto loan gets funded by the auto lender. People that can at least show the accountability to these types of debts and contracts (and have the bills in THEIR name, not someone else’s) are often seen as much better credit risks than people who use pre-paid phones, or have utilities and rental agreements in other people’s names. Lenders call these documents Proof of Residence (POR) and nearly ALL bad credit auto lenders require some POR documentation to give a loan. You wouldn’t lend someone thousands of dollars if you did not know where they lived, would you? If you have had a tough time with credit in the past, you may have to pay a deposit to get phone service, or other utility bills, but that type of accountability will come in handy on your next car loan.

3. Have PROVABLE Income

This topic is closely related to number two, but needs its own number because of how important it is. Auto lenders want to see your pay stubs. If you have bad credit, there's is little you can do about it. If you have good credit, auto lenders do not generally need to see your pay stubs and you will be able to get a reasonable loan with little or no trouble because you have shown the ability to pay your bills on time. (Quick question: If you have good credit, why are you reading this article?)

Often a client will walk into the WashingtonAutoCredit.com office, sit down, and say they make $X,XXX per month, but the Proof of Income (POI) shows half of what they say they make. There are usually lots of excuses: “I get paid under the table sometimes”, “I was sick for a week”, “I just got hired back on with the company ”, the list goes on. Most auto lenders do not look at your most recent check amount, they are more concerned with your Year-to-Date gross (YTD). Some excuses are acceptable, some are not. Just make sure you are honest with the person helping you with your loan because if the bank catches you in a lie, your loan will probably be turned down. If you have a reasonable reason for any time away from work, or low hours, the problems can usually be overcome.

4. Save a Reasonable Down Payment

Everyone knows that putting money down on a car loan is better than not putting money down. Do you know why? Sure, you could choose to have a lower monthly payment because you would be borrowing less money. It is bigger than that. You can almost always get a better interest rate by putting a significant amount of money down than you can by putting little or nothing down. The reason: Loan-to-Value (LTV) ratio. The lower the loan amount compared to the cars value, the less risk the lender assumes on the car loan. This works whether you have good credit, bad credit, or no credit. If the vehicle you buy is worth $25,000 to the bank, but the loan is only for $15,000, it makes sense that you would get a better loan on that vehicle, right?

If your credit is REALLY bad, or if you are dealing with negative equity on your trade-in, you might not have a choice but to come up with a down payment for your car loan. There are a few different factors that can affect exactly how much you need to put down.

First, there are several degrees of bad credit. Score alone is not an indicator. The timing of your car loan request compared to when any derogatory periods occurred on your credit (slow pays, repossessions, collections, charge-offs, etc.). The older those bad credit items are, and the closer they are to each other (chronologically) the better it looks on your credit now. As an example, if you repossessed a car loan last month, and want to buy a car today, it is probably going to take a lot more money down than it would if you repossessed a car two years ago and have not had any other negative items on your credit since then.

Second, any and all good credit you have had in the past matters. If you have had car loans before, that were paid well and eventually paid off (or traded in and paid off), it will look a lot better to a lender than if all of your previous car loans ended in repossession. The more staple periods of time that show on your old credit lines the better credit risk you will look like on your next auto loan.

If your credit is less than perfect, put SOME money down. Whether it is $1000, or $3000, if you come up with some money down, you will probably have better car loan options available to you than if you did not.

5. Be Flexible on Vehicle Type

With gas prices the way they are today, it is amazing the sheer number of people that the WashingtonAutoCredit.com staff talks to everyday who want to buy a big SUV or Pickup. Can you guess what the hardest types of vehicles are to buy if you have credit problems? Big SUV's and Pickups. Why? The majority of lenders that specialize in bad credit car loans want to lower their risk in any way they can because their clients are high risk. One of the ways that an auto lender will lower their risk is by stipulating that the vehicle they are willing to lend on for a particular client have very low miles, and be a recent model year. They do this because, statistically speaking, the #2 reason for a car loan going into default is people not making their payments because the car is broken down and in the shop. Even though people are supposed to make the payments no matter what, and it is not the banks fault that their client bought a car that is breaking down, people still often stop making car payments when the car is not working properly. (The #1 reason for car loans defaulting is loss of job, in case you were curious.) If you are open to different vehicle options, it will be much easier to get your bad credit car loan.

Bad Credit Car Loans can be more difficult if you are trying to buy an expensive vehicle. Have you priced late model SUV's and Trucks with low miles lately? They are expensive, especially with 4-wheel drive. Concede the fact that if you have bad credit, you will not be able to get a really low car loan interest rate, and the payments will be really high. Monthly car loan payments for bad credit customers on a low mile late model 4×4 with a small down payment (less than 20%) often start in the $500-$700 per month range.

Bankruptcy Auto Financing

The vehicles that tend to work best for Bankruptcy Auto Financing are late model, low mile, mid-size and compact cars. These types of vehicles will cost less and give you an affordable monthly payment.

If you have a bankruptcy, a bankruptcy car loan should be used as a tool to re-establish your credit. If you try to buy the most expensive vehicle you can be approved for, you will usually have much more negative equity when you look to trade that car in or refinance it in a year or two. With several years experience, the staff at Washington Auto Credit can confidently say that it is better(in the long run) to buy the least expensive vehicle that meets both your family’s NEEDS (not wants) and meets the lender’s guidelines. If you get a short term Bankruptcy auto loan on an affordable car to re-establish your credit, you would still have the option to buy the car you really want next time because you will be paying a lot less money in interest every month, be less upside down.

If you are interested in applying for a bankruptcy auto loan with Washington Auto Credit, you can click the link and go to the web site, or you can call 888-300-3502 and ask any questions you might have or apply by phone.

Your Auto Loan Application

The staff at WashingtonAutoCredit.com reviews many auto loan applications and see all sorts of ways people fudge the figures thinking it will help them get approved for a car loan. A lot of the time indiscretions made on the application only lead to frustration. Attention to detail can make or brake your auto loan.

People often think that if they “adjust” some of their information on a credit application, the auto lender will like the application more and approve it. Sometimes the bank will even give the borrower an initial car loan approval. A problem arises when the auto finance company starts to verify all of the credit application information and begins to find discrepancies. Usually the customer is driving “their new car” by the time the bank goes through this process and has to bring it back to the dealership. One of the worst feelings in the world is having to call a customer and tell them that they have to bring the car back because the loan fell through.

The two most common places that people stretch the truth on an auto credit application are in the Employment and Residence sections. Coincidently, that is also the most important information to the lender. Let’s look at both areas closely.

Employment Verification for Auto Loans:

Banks always want to know how much money you make. They almost always ask for Gross Monthly Income (monthly income before taxes and other deductions are taken out of your check). If you don’t know how much you make, find out. Only putting your net (take home) pay into the income box of an auto credit application may not give you enough income for a car loan payment, or at least for the car you want. If you are paid hourly, and work 40-hours per week, multiply your hourly rate by 173.3; the total is your Gross Monthly Income (GMI). If you get bonuses and commissions you can count those too. The easiest way to find out how much you make in this case is to divide the Year-to-Date (YTD) Gross on your year-end pay-stub by the number of months you worked there over that year. A lot of people underestimate their gross income because they only think about how much money is actually going into their bank account. Be sure to get full credit for the income you do have, but don’t lie about it either. If you calculate $2,500 per month gross income, do not write $3,500 thinking that it will look better to the bank. It will indeed “look” better, but when they review your pay-stub and call your employer (to verify your job) they may find out the truth and cancel on your loan.

Do not fudge your Employment Time either. One of the most common errors is claiming you have worked for a company for several years, but your employer says you are a “seasonal” employee, or they will only say how long you have been there since your most recent hire date. Some people do have seasonal jobs or are regularly subject to lay-offs and that information is very useful when your Auto Finance Application is being underwritten. If you started at company (A) four years ago and worked there for one year, then worked at company (B) for two years, and have been back at company (A) for the past year, do not write down that you have worked for company (A) for four years. put one year, and list company (B) as the previous employer. Of course, the lender would like the application better if you have four years on the job, but when they call your employer to verify your employment they will find out that you have really only been there for one year and could cancel your car loan.

Residence:

The time at address is similar to time at current job. Be as clear and honest as possible.

The Rent or Mortgage payment amount is a common spot for error as well. Many people have roommates and list only their portion of the rent. Most banks will only let you divide the rent up between however many people are on the lease. If you have one room mate and you are the only one on the lease you need to list the entire rent amount. When the car loan lender calls the landlord they will find out how much the total rent is and how many renters are on the lease. At the same time, if you are married and only one of you is applying for the car loan, the auto lender will probably still use the whole rent or mortgage amount. If you are married to the only other adult in the house, you should write the whole rent amount.

Raising your income, lowering your rent or exaggerating the amount of time you have been at your job and or residence can help you get an approval for a car loan, but the bank will find out the real numbers and adjust your approval accordingly. They may even turn your approval into a denial. Set yourself up for success and be as clear as possible on the application and tell your loan officer all the details. While there may be answers that sound better, the plain truth usually works out the best in the end.

At Washington Auto Credit we can help you submit your car loan application to the bank the right way. Fill it out on our web site and we will contact you to be sure we have all the details necessary get you approved and keep you approved!

Tax Time is Car Loan Time.

Congratulations! The US government is giving an economic stimulus check to hard working families this year. Why not use your stimulus check to help buy a car?

For millions of Americans, tax refunds represent the ONLY time every year when they will have $1,000-$3,000 (or more) at one time, in one lump sum. It is predictable and many people rely on it.

Do something intelligent with your tax stimulus check: use it to better your future. Spend it on something that will give you positive long term benefits, unlike a TV, furniture, vacation, clothes, or some other quick waste of money. There are several uses of your tax stimulus check that will help you become more financially sound.

Instead of blowing your tax stimulus package on a senseless purchase, use your 2007 tax stimulus check to focus on your financial well being. If you have bad credit problems, look to rebuild your credit. Developing a stronger credit history now can save you thousands of dollars in the future. One of the best ways to reestablish your credit is with a bad credit car loan, as long as you make your payments on time. It is amazing what 12-24 months of on time car loan payments can do to help raise your credit rating. If you are interested in applying for an car loan on-line, try WashingtonAutoCredit.com and start building your credit right away.

You could use your tax stimulus check to payoff or pay down your credit cards. Using as little as 20% of your credit limit can start to lower your score, so start by paying off your higher interest balances and then focus on paying off one card at a time. Eventually, you will have much less revolving debt and your scores should improve as your balances increase. In addition, your monthly debt payments will decrease and you will have more money available for your bad credit auto loan payment.

If you are getting a refund, you have a big decision ahead of you as you get ready to file your taxes. Make sure you think about your long term goals, and try to figure out how your refund will be able to help you achieve them. For many people, there is not a better solution than bad credit car loans.