It is possible for a consumer with bad credit to get approved for a car loan. These buyers normally only have to go through a dealer who works with special lenders. However, certain conditions must also be met for a borrower to qualify for a bad credit car loan.
Most special lenders want to see proof of regular, qualifying income. The duration of your current employment will also be important, as well as the time you have spent at your current address.
Renters and homeowners with damaged credit may be approved for car financing, but owning a home will give you an edge.
The benefit that comes with owning a home
When a special lender reviews your auto loan application, they are looking for proof of residency. Normally, providing a utility bill addressed to you is a good way to prove that you live in your accommodation.
Basically, lenders need to know where to find you if you stop making payments on your loan. This is why, if you have credit problems, your chances of obtaining a loan will be better if you have lived at your address for a long time. Owning a home, as opposed to renting a house or apartment, should further improve your chances of acceptance.
- Home ownership is showing stability. Buying a home requires a significant financial commitment. So when a lender sees that you’ve committed to such a purchase, it seems likely that you won’t be leaving any time soon.
In the eyes of a lender, the fact that your residence is so stable reduces the risk of lending. It’s pretty clear that you’ll be in the same place if there’s a payment problem.
- Owning a home is good for your credit. If you have a mortgage with a bank, the payments you make will be reported to the credit bureaus. Of course, this is only an advantage if you have made all your payments on time. Even if you’ve had credit problems in other areas, your positive payment history with your mortgage will work in your favor with a lender.
If, on the other hand, you are a renter, your landlord may or may not report your payments to the credit bureaus. Therefore, your monthly rent checks might not create a positive payment history.
Get an Approval Advantage as a Tenant
While owning a home can score points with a lender, being a stable tenant can also increase your chances of auto loan approval.
- How long have you rented the same accommodation? Even if you don’t own your home, if you’ve been in the same place for several years, that’s also proof of stability. If it is clear that you are an established resident, it will seem less likely that you will suddenly leave. Even if you recently moved, if you have lived in the same area for at least a long time, a lender may not see this as a red flag. Also, if you moved for a job, your lender will take this into account.
- Does your landlord report your rent payments? Most landlords don’t report their tenants’ payments to the credit bureaus, but some do. Find out if your landlord is reporting payments or if they’re at least open to the idea.
There are companies like Level Credit that offer a rent reporting service. All you have to do is sign up and pay a small monthly fee. Then you can start building your credit simply by paying your rent on time each month. You will also establish a good payment history to show future lenders.
The bottom line is that owning a home is helpful if you have bad credit and need car finance approval. However, tenants may also find success with special lenders. Plus, being approved for a car loan will give you the opportunity to establish good credit. That way, later on, you might have a better chance of buying a house when the time is right.
The Auto Express Credit advantage
If you have bad credit and need to buy a car, Auto Express Credit can help. We can put you in touch with a dealer in your area who is connected to special lenders. With our service, you can be approved and back on the road faster than you think.
Applying to us costs nothing and you will have no obligation to purchase anything. So you have nothing to lose except another car-free day. Go ahead and complete our simple and secure online application to get started today.