A typical bad credit lender will look beyond your credit scores to determine the interest rate you qualify for with a bad credit car loan
Bad credit auto loans
If you’re thinking of applying for easy credit auto loans , one of your biggest concerns has to be the interest rate you’ll be charged.
During the past twenty years, we’ve heard this question from just about everyone we come into contact with here at Auto Credit Express , where our commitment to bad credit consumers even extends to our web site. This site features a bad credit auto loan application ” something we felt was needed after seeing the frustration and disappointment that customers with poor credit often experience when a dealer can’t offer them second chance auto loans .
And while these customers can always use a tote the note dealer, this won’t solve their auto credit issues since the majority of these dealers don’t report loans or payments to the credit bureaus and the loans, themselves, often result in repossession .
Answering the interest rate question
In most cases, though, we can’t tell a customer what their interest rate will be until they’ve been approved by lenders offering easy credit auto loans .
For individuals with good credit (a FICO score of 740 or more) or even mildly good credit (a FICO score of 680 to 739), a lender checks the type of auto credit and, assuming it’s recent, will assign an interest rate based on the credit score. This is why rate comparison is easy if you have good credit.
Even those with a FICO score of 620 to 679 have a chance of getting an interest rate based primarily on credit score alone.
If your FICO scores fall below 620 to 640, however, most traditional lenders will not consider you for a car loan. Instead, you’ll need to apply for a easy credit auto loans.
Looking past FICO scores
Lenders that deal in auto loans for bad credit are different because they look beyond your credit scores and, using special scoring models, consider a number of other factors to determining if you qualify and, if so, the interest rate you’ll be assigned.
Ability
The first thing they consider is your ability to pay. In other words, can you afford to make a car payment? In doing this, lenders look at how much you make as well as what is left after you pay your monthly bills. Typical bad credit lenders prefer that all of your debts, including a car payment, not exceed 40% to 50% of your total monthly income. The lower this debt-to-income (DTI) ratio is, the better your application will score.
These lenders also prefer a monthly car payment that’s below 15% to 20% of your total monthly income. The lower this payment-to-income (PTI) ratio is, the better your application will score.
A large down payment also helps. More money down decreases the loan to value (LTV) ratio and reduces a lender’s risk. The lower the LTV, the better the
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