Your income as well as expenses will determine if you budget for poor credit car loans

Available income

Credit-challenged buyers will find that it’s the income after expenses that will qualify them for approved auto loans.

We’re well versed in this as we’ve spent the last two decades involved in bad credit auto sales here at Auto Credit Express. We even created a website so we could share information regarding tote the note loans and credit unions as well as today’s topic, the budget requirements of terrible credit auto loans.

DTI

After receiving your credit application from the dealer, one of the first things a bad credit lender will do is determine your debt to income ratio (DTI). You can do this, too.

Start by counting up all your regular monthly bills including mortgage or rent payments, credit card payments, loan payments, average utility payments and anything else (such as student loans or child support).

Next, divide this amount by your gross monthly income (what you earn before taxes and other deductions). This will show you your monthly debt percentage. Bad credit lenders normally cap your total monthly debt (adding in a car payment plus car insurance) at 50% of your monthly gross income.

PTI

At the same time, most lenders that offer bad credit car loans will not want your car payment (with insurance) to exceed 15% of that gross monthly income figure. This is known as a payment-to-income (PTI) ratio. This means that with a gross monthly income of $3,000, a combined car and insurance payment can’t exceed $450. Since most lenders assume $100 for car insurance, this leaves a budget of $350 or less for a car payment.

Budgeting additional expenses

When you compute your vehicle budget, be sure to include expenses for gas and both normal and unexpected maintenance costs – which brings up another point.

If you are thinking of buying a used car without a service contract (extended warranty), plan on setting aside funds each month to cover the possibility of repairs.

The alternative – purchasing a service contract that covers the entire loan term – means you’ll be guarding against most unforeseen expenses caused by mechanical problems that might otherwise cost you hundreds or even thousands of dollars.

As we see it

By understand the way lenders compute your DTI and PTI, you can determine, before you apply, if you meet the basic requirements for bad credit auto loans.

If you do meet the basic requirements we want you to know that Auto Credit Express places customers that have bad car credit with dealers that specialize in approved auto loans for a wide range of credit situations.

So if you’d like us to help you get your auto credit back on track, you can begin now by filling out our online auto loans application.

Tags: Bad Credit, bad credit auto loans

This entry was posted and is filed under Auto Loans, Bad Credit, Lender Companies. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.