HOW TO GET AN AUTO LOAN WHEN YOU HAVE LOW INCOMEIt’s easier to get an auto loan now even if you have bad credit. But what if you have low income?
Your income is the next biggest factor lenders look at when assessing your creditworthiness. If you are not earning enough, you might be denied an auto loan.
So take a look at the tips below on how you can get approved for a car loan even with bad credit and improve your income.
How to Get Approved for a Car Loan
LESS EXPENSIVE VEHICLE. Buy a car on the lower end of the price scale. This advice doesn’t suggest that you pick something that will need constant repairs. Just don’t buy an expensive car that you might not afford to pay up over time in relation to your income now.
DOWN PAYMENT. Save a decent amount of money for a down payment. Not only will a down payment help you qualify for a loan, but it will also make you look more dependable and responsible to lenders.
COSIGNER. Maybe someone you know with a good credit report can cosign for a car loan. A close relative or friend may be willing to help you get the car you need if they can trust you to pay the loan. Just make sure you’ll be able to pay on time so that you will not cause damage to your cosigner’s credit when you default.
CREDIT UNIONS. You may be able to finance your car through a credit union since they will be taking your payments directly from your check. If you are a member of a credit union, try getting a car loan from them first.
GOOD LENDER. Look for the best lender you can find. A good lender will not only approve your loan, but will help you improve your credit score by reporting your consistent payments to one or more credit bureaus.
BE HONEST. Lying about your income or credit score won’t help. It’s better to be honest about it with the lender, especially that there are several lenders now that are willing to create a workable budget for you.
SHORT TERM. Keep the loan term shorter. Do not stay in debt too long. Even if monthly payments look bigger in a 48-month auto loan than in a 72-month, it’s okay. Tell lenders that you prefer a short-term auto loan to a long-term one. It minimizes the risk of being delinquent. It is also what lenders actually want.
How to Improve Your Income
- Eliminate as much debt as you can or start paying your bills on time. Even if you have low income, you can get more chances of getting approved for a car loan when you have less debt.
- Get another job. You can take a part-time job or do something that you like and make money from it.
- Turn some clutter into cash. There are certainly things in your house that you are not using anymore. Instead of just throwing these away, sell them for some good price.
- Save money. If you are really serious about paying off an auto loan on time and keeping a good credit, make sure you are disciplined enough to save money. You can cut down on your food allowance, for instance, and spare some money for the loan payment. You can also minimize the use of your credit card.