What is the maximum I can borrow with a subprime auto loan?
The maximum you can borrow with a subprime auto loan depends entirely on your personal circumstances. There is more to consider when it comes to getting a car loan with bad credit than you might think. And, your options may not be as limited as you think.
Spending limits for subprimes
When it comes to auto loans, “most” is subjective. Most lenders set minimums rather than maximums. Even though there is no maximum amount for the car loan, the sky is usually not the limit. However, the minimum amount that you are generally allowed to finance is $ 5,000 including taxes, surcharges and fees.
This means that the minimum amount financed must be at least $ 5,000, not that the vehicle must cost that much. If you can manage to find a car below this amount, you may still be able to finance it if all the extra charges bring it back above the minimum threshold. To finance a vehicle with a subprime lender, it must also be less than 10 years old and less than 100,000 miles.
There are also other factors that determine the amount of a loan you can get. For example, subprime loans typically do not exceed 125% of the loan-to-value ratio (LTV).
Plus, instead of focusing on how much you can get for a car loan, it’s important to figure out how much you can comfortably afford to repay. You must prove that you have sufficient income to cover any amount you borrow. This usually means having a debt-to-income ratio (DTI) that is no more than 45% to 50% of your gross monthly income to qualify.
Get a subprime auto loan
Getting a subprime car loan is not like getting a direct loan with good credit. You usually have to prove that you can handle the loan and get approved before you can even choose a car. Lender requirements can vary, so it is important to know what is expected of you with different lenders.
Lenders at risk are generally indirect third party lenders who work through special finance dealers. The CFO is the go-between between you and the lender, so you usually need to bring all of your paperwork with you when you visit a dealership. These include proof of income, residence and a working phone. You will likely need a valid driver’s license, personal references, and a down payment of at least $ 1,000 or 10% of the vehicle’s selling price.
The good news is that some captive lenders also offer loans to people with poor credit. This means that you can usually find loan options at franchised and independent dealerships, and may even be able to purchase a new affordable car in some cases.
Internal funders, on the other hand, only sell used cars. Also known as Buy Here, Pay Here (BHPH) resellers, they don’t always need as much documentation as a subprime lender. And, since they don’t depend on third-party lenders, these dealerships don’t always require a credit check. You still need a valid driver’s license in most cases, and to be able to prove that you are earning enough to cover the loan. You also usually need to provide a large down payment, sometimes up to 20% of the vehicle’s selling price.
Ready to start?
Loans can be complicated, and knowing what is expected of you every step of the way is a good place to start. Whatever type of loan you need, the first step should be to check your credit reports and your score. Once you’ve done that, you need to find a dealer or lender to work with, and that’s where we come in.
TO Auto Express Credit, we have developed a nationwide network of special finance dealers who have options. We want to take the stress out of your next risky auto loan situation by connecting you to a local dealership. The process is fast, free and without obligation. Get started today by filling out our auto loan application form.