What is the maximum I can borrow with a subprime car loan?
The maximum you can borrow with a subprime auto loan depends entirely on your personal circumstances. There’s more to consider than you might know when it comes to getting a car loan with bad credit. And your options may not be as limited as you think.
Spending limits for subprime mortgages
When it comes to auto loans, “most” is subjective. Most lenders set minimums rather than maximums. Even though there is no maximum auto loan amount, the sky is usually not the limit. However, the minimum amount 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 has to cost that much. If you can find a car below this amount, you may still be able to finance it if all the extra costs take it above the minimum threshold. To finance a vehicle with a subprime lender, it must also generally be less than 10 years old and have less than 100,000 miles.
There are also other factors that determine how much of a loan you can get. For example, subprime loans generally do not exceed 125% of the loan to value ratio (LTV).
Also, instead of focusing on how much you can get on a car loan, it’s important to look at how much you can comfortably afford to repay. You have to prove that you have sufficient income to cover any amount you borrow. This usually means having a debt to income ratio (DTI) ratio that does not exceed 45% to 50% of your gross monthly income to qualify.
Get a subprime car loan
Obtain a subprime car loan is not like getting a direct loan with good credit. You usually need to prove 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.
Subprime lenders are usually indirect third-party lenders who work through specialist financing dealerships. The CFO is the middleman between you and the lender, so you usually need to bring all of your documents with you when you go to a dealership. These include proof of income, residency and a working phone. You will likely need a valid driver’s license, personal references and a deposit at least $1,000 or 10% of the sale price of the vehicle as well.
The good news is that some captive lenders also offer loans to people with poor credit. This means you can usually find loan options at franchise and independent dealerships, and even be able to buy an affordable new 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 require as much documentation as a subprime lender. And, because they don’t rely 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 show that you earn enough to cover the loan. You are also usually required to provide a large down payment, sometimes up to 20% of the sale price of the vehicle.
Ready to start?
Loans can be complicated, and knowing what is expected of you at each stage of the process is a good place to start. Whatever type of loan you need to get, the first step should be to check your credit reports and score. Once you’ve done that, you need to find a dealership or lender to work with, and that’s where we come in.
AT Auto Express Credit, we have cultivated a national network of special financing dealers who have options. We want to take the stress out of your next subprime auto loan situation by connecting you with a local dealership. The process is quick, free and without obligation. Start by filling out our car loan application form today.