Most content is focused on getting approved for an auto loan with bad credit, overlooking the factors that can provide you with a swift denial. Some of these issues may be out of your control, while some are easily avoidable.
What Will Cause an Automatic Decline of Your Application?
No Telephone. A home or cell phone is required by all lenders because they have to have a way to get in contact with you, should an issue or delinquency occur. No phone = no loan.
Unpaid Tax Liens. Depending on the amount owed, unless payment arrangements have been made and documentation provided that those arrangements are being fulfilled satisfactorily, unpaid federal income tax liens may cause an automatic decline.
Insufficient Income. Most bad credit auto loan lenders require a minimum monthly income of 1500 to 1800 dollars per month. Having an income below this level will result in your application being declined automatically before it is reviewed.
No Proof of Income. For employees that receive a W2, a copy of your most recent pay stub or last 3 bank statements is usually sufficient. Those that are self-employed may be required to provide IRS tax returns from the last two years. Some lenders allow child support and alimony payments to be included in your monthly income amount, in which case documentation from the court will be needed for verification.
No Proof of Residence. The loan is approved in part, based on the value of the collateral and the lenders ability to recover that collateral in cases of loan default. The lender has to know where that collateral is garaged in order to be able to approve a bad credit auto loan. You must provide adequate documentation, such as a recent utility bill that was received at your home address within the last 30 days of closing your loan.
Current Bankruptcy. If you are currently in a bankruptcy, then unless you have a letter granting you authorization to incur debt, you will be automatically declined.
Multiple Repossessions. This will cause your application to be automatically declined. You may have the only option of using a buy here, pay here car lot. A better option would be to simply save as much as you can and pay cash for an inexpensive vehicle until your credit history is re-established.
Last, But Not Least…
Being Deceptive. Putting false income or other statements on your loan application will immediately break any confidence that the lender has in you. If it’s bad, say it’s bad. Don’t try to make up facts to fill in the blanks on the application. Be upfront, truthful and honest because there is not anything that you can put on your application that a sub-prime lender has not already seen before. If you aren’t upfront, and the lender subsequently discovers a falsehood on your application, you can expect a swift denial.