Bad Credit Auto Financing – Getting Approved Through a Subprime Lender With a Low Credit Score

If you have experienced credit problems and are seeking to get approved for an auto loan, you may already be aware that in today’s economy, it’s a bit difficult. This is especially true if you apply with typical prime lenders. There are however, secondary or subprime lenders that are exclusively dedicated to providing auto loans for people that have lower credit scores.

As these lenders provide bad credit auto financing, they function a differently from prime lenders. One of the main differences between a subprime lender and a prime lender is their requirements for loan approval.

While a prime lender will generally expect a prospective client to have a credit score of 700 or above, in order to qualify for prime interest rates, a subprime lender be able to approve those with lower credit scores. Every lender is different and has their own individual guidelines.

Subprime lenders generally have several different tiers, or approval levels that they offer clients. This is frequently through car dealerships.

The tier that someone is able to get approved for, depends on several different factors.

• Time on job (preferably 12 months and 3 years of continuous employment in the same field)
• Income (minimum income amounts vary by lender, but $1500 per month is common)
• Debt to Income Ratio (the amount of income vs monthly obligations)
• Payment to Income Ratio (monthly payments generally cannot exceed 20% of monthly income before taxes)
• Other factors, depending on the individual lender

Down payments can be required, although rebates and trade equity can eliminate the need for having to spend cash out of pocket. While it can be a wise idea to reduce the amount that you are financing as much as possible, it’s not always a feasible option. In general, lenders will not advance more than 120% of trade in value on a particular make, model and year of vehicle. Vehicle mileage affects this value as well and should not be overlooked when calculating this number.

Interest rates vary from one lender to another, and dealerships add points to interest rates that are approved through them. This is why it’s always a good idea to shop around to make sure that you are on the fair end of the deal.

Recommended subprime lenders are listed at http://www.buyingcarswithbadcredit.com.