Are there auto loans for bad credit out there?  A consumer struggling with revolving debt problems may not believe so, but they need to realize that there are several keys to obtaining a loan for a new car in these uncertain economic times.  The twenty first century consumer needs to know the factors that control the process.  Different financial institutions place a different emphasis on what’s important.  The application for the loan reveals a lot about the process.  Among the most essential facts collected by the application are your credit history and your current employment.  These are used to determine your credit score and whether you have a reliable source of income.

Your credit rating can make or break your car loan. It alone can determine whether you leave the bank with a new car loan or empty-handed. Your credit rating basically tells the bank or credit union what kind of risk issuing the loan would be to them. The most common score is based on a standard model created by the Fair Isaac Corporation, FICO. FICO takes into account the following: your payment history, your total debt, the length of your credit history, any new credit accounts you have opened, and the different types of debt that you have. Using the above score, the financial institution will predict your ability to repay the loan. During the loan process, a low score may result in a higher interest rate or outright denial of the loan. The bank may also ask for minute financial details.

Although it is not as important, the financial institution will also look at your employment history. Your employment history will be used by the bank to ascertain whether you will have the physical income to actually repay the loan in a timely manner. Among the points of interest in your employment history will be your actual monthly income which will be contrasted with your debt and how long you have been working in that occupation. This latter point is important even if you have switched employers because it shows continuity of income and thus reduces risk in the eyes of the bank. Another factor that could reduce risk in the eyes of the lender is having a co-signer. The bank will use the co-signer’s financial history to reduce their risk since the co-signer is now responsible for payments if the primary borrower defaults on the loan.

With good credit, your employment history is not that important because your credit score determines your risk. With bad credit, your financial information is very important. Keeping this in mind, when you are trying to get a car loan, make sure that the car you want to purchase is a car that you can afford. That it is a car that you can budget into your monthly expenses. The financial institution will see this as clearly as you do. Another key to obtaining a car loan is to shop around for your loan. This may seem obvious, but there are some important factors to remember. A bank or credit union that you have a history with may determine that you have less risk than another institution. They are privy to information on payments that you make and income you deposit that may favor your application. Remember, just because a consumer has bad credit does not mean that they cannot get a car loan. There is such a thing as a bad credit car loan.