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Typical Car Loan Requirements for Buyers with Poor Credit

If you need to finance a vehicle and you have damaged credit, there are lenders out there that will work with you. In fact, getting approved for a car loan with credit issues may be easier than you might expect - if you're able to find the right kind of car dealer.

Only certain dealerships are connected to special finance lenders. These lenders consider factors beyond credit scores in order to finance applicants with credit problems. Of course, special finance lenders still have certain requirements that must be met before they will approve you.

What You May Need to Qualify for a Car Loan with Credit Issues

Different special finance lenders have different approval requirements. However, most of them share similar stipulations. Once you meet with the dealership finance manager, you will find out exactly what you need in order to get your car loan approval. But, in the mean time, it's good to have a general idea of what will probably be expected from you. This way, you can be as prepared as possible.

The following list reflects what is normally required from car loan applicants who have less than perfect credit.

1 - Verifiable Income and Proof of Employment

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First and foremost, a special finance lender will want to verify that you have the means to pay back your car loan. Because of this, most lenders have a minimum income requirement for borrowers with tarnished credit.

For the most part, you will be expected to prove that you earn at least $1,500 a month (pre-tax). You may also need to show a steady history of employment. In fact, if you've had your current job for less than two years, many lenders will ask for information about your previous jobs.

If you receive a stable income from sources such as disability benefits, this income might be considered. But because this type of income isn't garnishable, you'll need proof of supplemental income that can be garnished. Or, if this isn't an option, having a cosigner may be necessary.

If you are planning to apply for your car loan in the near future, you should gather your most recent paycheque stubs. In order to verify alternate income sources, you might need to produce court documents or copies of your tax returns from the past two years.

2 - A Valid Driver's Licence that Belongs to You

A valid driver's licence will prove your identity and that you are at least the age of majority in your province. It will also be necessary to drive the car you intend to purchase and acquire the necessary insurance coverage.

It should go without saying that the licence you present should belong to you and not be expired. If your driver's licence has expired, you should have it renewed before applying for a car loan.

3 - A Recent Utility Bill that Bears Your Address

Because special finance lenders don't base approval decisions entirely on credit history, they look for other signs of stability. Your job and your income are important, but they also want to see that you maintain a stable residence.

It will be viewed favourably if you've lived in one place for a long period of time. And being able to prove that you own your own home will improve your approval chances even more.

And speaking of utilities, you will also need to provide your lender with a working phone number in your name at the address on the application. While a land line used to be required, cell phones are now considered acceptable. But you'll need to show that you have a contract with a well-known carrier. Most lenders won't accept a pay-by-month phone plan that can be terminated at any time.

4 - A Bank Account

Some lenders will want to set up automatic payments every month in order to ensure that you meet your due dates. In order to do this, they will need proof that you have an active bank account. So, if you find out that having a bank account is required by your lender, you should prepare a voided cheque. You may also be able to use a pre-authorized payment form if you don't use cheques.

5 - A Down Payment

While not always required, a down payment is worth mentioning because having one is very helpful. With a large enough down payment, you can reduce of the size of the loan you're requesting and possibly get a better chance at approval.

Putting cash up front on your car purchase may also reduce your monthly payments or allow you to shorten your loan term. In addition, a down payment can reduce the risk of accruing negative equity in your vehicle.

Expert Assistance for Car Buyers with Poor Credit

If you have issues with your credit, but need to buy a car as soon as possible, Canada Auto Loan is ready to help. We can match you with a dealership in your area that is connected to the right kinds of lenders. You'll get a better chance at auto loan approval, and it won't cost you a thing. This is because our service is free of charge. You will also be under no obligation to purchase anything when you apply with us.

See how and easy and hassle-free your next car buying experience can be. Just fill out our simple and secure online application to get started today.