How Much Can I Get Approved for With a Bad Credit Auto Loan

by Steven
(San Francisco, CA)

Question: I'm wondering how much I can get approved for with a bad credit auto loan. Is there a maximum amount that bad credit lenders have in place or does it vary from person to person?

I've seen the car that I want on several different dealers websites and it looks like (including Tax, Title and License) that I'd be financing somewhere in the $25,000 range. Is that too much?

If it is not, do you have any suggestions as to where I can apply? Thanks!

Answer: Hi Steven,

How much you can get approved for with a bad credit auto loan will vary from person to person based on a few key factors.

First off, with subprime auto loans it is unfortunately, very difficult - if not impossible - to get approved for on ones own. The lenders assume more risk lending direct to the consumer and structuring loans is a factor that becomes much more difficult.

On top of that, most subprime lenders charge the dealer an acquisition fee which can range anywhere from $500 to several thousand dollars and there is no way to factor that when lending directly to the customer.

The key factors I referred to above that will determine how much you can get approved with a bad credit auto loan are:

1) What type of loans you've had in the past (not as big a factor)

2) Job stability (moderate factor)

3) Percentage of payments to monthly income (big factor)

4) Percentage of debt - including the
new car payment - to monthly income (also a big factor)

These can be summed up with these three keys lenders look for and those are Ability (to pay), Stability (job) and Past Credit History (also referred to as willingness). With subprime auto loans those are in order of importance to the lender.

Ability is certainly number one, because the lender wants to know how and that they will (more than likely) get their money back with interest.

As far as any kind of lending cap or max loan amount, many lenders will max out at $40,000, but some have a sky's the limit policy. The sky's the limit policy of course only comes into play if the customer meets the banks guidelines regarding Ability, Stability and Past Credit/Willingness.

If you make $2000 a month, then the $40,000 is not gonna happen, because you won't have the ability to repay the loan. With that type of monthly income an $8000 to $12,000 might be more suitable and about the max you'll probably get approved for.

On the other hand, if you make $20,000 a month, then you will have quite a few more options. Yes, people that make that kind of money can have bad credit!

As for where to apply, I'd recommend Auto Credit Express. they are not the lender, but work with nearly 600 dealers nationwide that specialize in bad credit auto loans. These dealers should have the resources (i.e. the lenders) to help you get approved.

Hope this helps,

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