Most individuals with bad credit fear applying for a car loan due to several reasons. First and most important, they fear rejection due to their past credit problems. Secondly, if you're not sure what information they need to provide to consider for an auto loan bad credit. Finally, most do not know where to look for auto loans, plus your local car dealer or Bank. The process of application and approval is much simpler than you may think, and getting an auto loan even with bad credit is possible, provided you understand how things work.
Verification of identity
Firstly, to consider you as a candidate for any loan, a bank or other financial institution needs to verify your identity. While the initial request does not require that you submit any supporting documentation and only requires that you provide your name, address, date of birth and social security number; You'll have a few things later in the process. Lenders will ask you for a valid ID, proof of residence in the form of a telephone, electricity or any other utility bill in your name and any other document with your name on it, like a cheque or credit card. As the number of cases of identity theft is on the rise, banks need to make sure that you are in fact the person who is applying for a loan.
Credit check
Once you establish your identity, a lender will run a credit check. Unlike mortgage, auto loan companies generally use a credit Bureau of your choice. Using your name, date of birth and social security number that they will check all your past and present credit obligations, as well as get your credit score. In many cases, the credit score itself is enough to make a decision of approval. If your credit score is less than 640, a creditor may reject you right on the spot, as traditional banks would do, or perform a detailed examination of its ability to report and repay the credit.
Ability to repay
No matter how good or bad your credit score is creditors always ensure that you have the means to pay off the loan. Therefore, they do some financial calculations based on your actual income and expenditure when issuing your loan. Ability to repay is probably more important than your credit standing, because shows lenders that you have enough disposable income to assign monthly loan payments. Depending on the lender, your qualifying income can be performed based on statistical formulas, or according to your actual expenses.
Types of auto loan application
Today, you can request a car loan in two ways. The traditional way is walk into a car dealership location or at a Bank, and submit a credit application. This is what most people and what people with bad credit should not do. Traditional lenders endorses tougher and probably you'll have nothing but the embarrassment of being rejected in front of a bank or a representative of the concessionaire. Another way is to apply electronically, i.e. submit an application online. Online applications are faster and easier and undergo several creditors, increasing your chances of success. Auto online lenders have lower overhead compared to banks and are able to move a little in their needs to get you approved. If your credit is bad, applying online is the best way to go on your quest for auto financing.
Kate Ross has master's degree in finance and was a lecturer, as well as financial consultant for years. She specializes in Unsecured Loans and also in helping people obtain approval for guaranteeing loans for bad credit, among many other financial products. For more information, please visit speedybadcreditloans.com