Getting approved for a bad credit car loan doesn't have to be difficult. As long as the right steps are taken, the process can be fairly simple. It really comes down to knowing the requirements, having the necessary documents and connecting with the right resources.

Of course, anyone seeking approval for a bad credit car loan should know exactly where they stand with their credit before applying. Each of the three primary reporting bureaus will provide a copy of their credit report to consumers every 12 months.

So, if you have not checked their reports in a while, you only need to visit AnnualCreditReport.com. Here, you can request reports from TransUnion, Experian and Equifax.

Bad Credit Car Loan Requirements

Car Loan

Normally, a person's credit score is a determining factor in whether or not they will be approved for auto financing. However, special finance lenders are able to take other factors into consideration in order to approve bad credit applicants.

Here are the typical special finance lender requirements.

  • A Qualifying Income:
    Lenders will need to verify that a potential buyer will be able to afford a car payment. So, they will want proof that an applicant has a gross income of at least $1,500-$1,800 per month. If someone has multiple jobs, only the income from the primary employer will be considered.
  • A Steady History of Employment:
    Ideally, lenders will want to see that an applicant has had the same job for a year or more. However, most lenders are fine with someone who has switched employers but stayed in the same field. Even if a buyer has an entirely new job, a lender may be willing to work with them as long as they have had the job for at least three months.
  • A Stable Residence:
    Special finance lenders like to know that a borrower can be found in the event that payments are missed. So, those who own their own homes have an advantage when applying for a bad credit car loan. This is because lenders know that they have a financial stake in their residence. Of course, renters won't be excluded. It will just be helpful if they have lived in their house or apartment for at least six months.

The next step in the bad credit car loan process is for the applicant to provide documents that prove that these requirements are met.

Documents Needed for a Bad Credit Car Loan

When looking at how to get approved for a bad credit auto loan, it's a good idea to know what documents will be required. This way, everything will be organized and ready to go, and the process will move faster.

Usually, when a buyer sits down with a finance manager at a dealership, they will need the following:

  • Recent Paycheck Stubs
  • Recent Utility Bill Addressed to Them
  • Valid Driver's License
  • List of at Least Six Personal References
  • A Phone Bill with the Applicant's Name and Address

If you bring in proof of other income sources, it may not count toward the basic income requirement, but it can still be helpful. In making an approval decision, lenders will look at existing debt as well as monthly income. They do this in order to make sure that an applicant's income can support a new financial obligation.

The consumer's income versus the amount that they pay in bills every month is called their debt to income (DTI) ratio. Ordinarily, lenders want to see that, with the new car payment included, a borrower's DTI ratio does not exceed 50%.

The Best Resource for Bad Credit Car Loans

One of the most important steps in the bad credit car loan application process is finding the right dealership. This is because only certain dealerships are connected with the kinds of lenders that are able to approve buyers with damaged credit.

At Drivers Lane, we have a nationwide network of dealers that are qualified to work with bad credit buyers. So, if you have bad credit, we can match you with a dealership in your area that can give you your best chance at auto loan approval. You may even be able to buy your car with little or no money down.

Our service is fast, free and requires no obligation. Go ahead and fill out our simple and secure online application to get started today.