If you have damaged credit, getting approved for an auto loan can be a difficult task. You have probably gone from dealer to dealer trying to get approved only to be turned away. If this is the case, you are probably wondering why.
The reason most likely lies with the fact that you have subprime credit. Most car dealerships work with lending partners who want to see their applicants have a certain credit score. If you do not meet this requirement, you may be denied on the spot.
And even if you find a dealer who works with a lender who is comfortable dealing with subprime credit, you may be denied if you fail to meet their particular set of approval requirements.
What You Can Do To Turn the Tables
If you can't seem to get approved for an auto loan, you might need to change your approach. There are a few things you can do to tweak your buying position in order to meet the approval standards of a particular lender.
- Review and Rebuild Your Credit
If you have been denied for a loan, you are entitled to a complimentary "adverse action" credit report. It's good to check out your reports after you have been denied. You can view all of your credit data to see what lenders are seeing. If you notice any information that is inaccurate or out of date, you can file a dispute to have it removed. Beyond that, you can examine the information on it and try to identify the problem areas with your credit. You may need to reduce your overall debt, or develop a strict budget to clean up your payment behavior. It may take time, but improving your credit by even the smallest margin can be the difference between approval and denial.
- Look Into Cheaper Vehicles
Did you head to a dealership or loan provider with a particular vehicle in mind? It's possible that the loan amount required to finance that particular vehicle, or the monthly payment associated with it, tipped the scales out of your favor. Lenders have strict guidelines on your debt-to-income (DTI) ratio and your payment-to-income (PTI) ratio. They don't want to see your DTI exceed 50% of your gross monthly income, or see your PTI exceed 15-20% of your gross monthly income. A cheaper vehicle option can tilt these ratios in your favor.
- Increase Your Down Payment
Lenders hate to take on excess risk. If you have little to no money down on top of poor credit, it can kill your approval chances. Subprime lenders don't like to approve loans where the buyer will have negative equity for a long period of time. A significant down payment, preferably anywhere from 10-20%, will give you less of a chance of becoming "upside down" on your auto loan. Lenders will then view the loan as less risky and will be more likely to approve you.
- Add a Cosigner
When all other avenues are closed to you, you could see if getting a cosigner will help. While this should be seen as more of a last resort, it could be the tipping point between approval and denial. Again, lenders hate risk, so getting somebody with a strong credit history to cosign the loan can change the way they view your application. Keep in mind that this person will be legally responsible to make the payments in the event that you can no longer meet the obligations of the loan.
If all else fails, you are going need some help. We know just the people you can turn to when you have bad credit and are struggling to get approved for an auto loan.
We Can Help You
The team here at Drivers Lane can help you get the car you need. We are experts in the subprime domain and are partnered with a nationwide network of special finance dealerships who know how to work with any credit situation.
Our process is simple. We'll get the information from you that we know these subprime lenders are looking for. We'll use it to find the perfect dealership from our network in your local area that can work with your unique situation. All you need to do to get the ball rolling is fill out our fast and secure online application.