Posted on: Oct. 22, 2017 in Car Loans

When you have bad credit and you need a new car, you may be concerned you won’t qualify. While it will be harder to get a loan, you do still have options. You’ll need to have a stable income and employment history and your credit score will be considered. How much money you have in your bank account won’t be a factor, but it does matter. Here’s why your budget and your savings matter when seeking a bad credit auto loan.

It’s Not What You Think

You might be surprised to learn you won’t have to submit a bank statement to obtain a loan or prove that you have a certain amount in reserves. Lenders generally aren’t concerned with how much money you have stashed in a checking and savings. Accounts like your 401(k) or other retirement accounts also won’t be considered either.

Savings Do Matter

While no one is going to ask you how much money you have, savings are important when buying a car. First, a down payment can help you get approved for financing because you’ll need to borrow less of the car’s purchase price. It will lower your monthly payments and could possibly help you get a better interest rate.

Once you’ve got your down payment covered, you’ll also want to have a little stashed away in case of emergencies. You need to expect the unexpected when it comes to cars – a breakdown or an accident can set you back if you’re not prepared. Aim for a $1,000 emergency fund at minimum.

Budgeting for Payments

In order to be approved for an auto loan, you’ll have to prove you can afford to make the payments. Your debt-to-income ratio, the amount of money you earn compared to your monthly obligations will be taken into consideration. How you spend the rest of your money each month is really up to you. If you sign on the dotted line that you agree to make payments every month, you need to make sure you can make those payments. No one but you needs to know if that means you’ll still have enough in the budget to get a daily latte or if the car payment is going to leave you right on the edge, but it’s wise for you to make sure you’re comfortable with the obligation before you agree.

If this is your first car, you’ll also have to add new items to your budget such as car insurance, gas, and vehicle maintenance. Your emergency fund shouldn’t be for expenses like this since you know you’re going to have to foot the bill these items on a regular basis.

Having savings and a budget for your new car won’t guarantee you’ll get approved for a bad credit auto loan, but you’ll want to have these in place when you do!

If you’re ready for a new car but your credit is keeping you from getting approved, CreditYes can help with our bad credit auto loan program! We can match you with a dealership in your area that will be with you every step of the way. Our service is fast and free. Fill out our secure online application and get behind the wheel of your next car today!