How to improve your odds of securing a loan

When dealing with damaged credit there are a lot more hoops for the dealer and customer to jump through to secure financing with a bank, but at the end of the day there are a things that can be done to increase your odds of securing a loan.  As mentioned before it’s not just the customer the banks make demands on, it is also the dealer, so we will start on the consumer end then move on to the dealer in my next post.

 As a consumer with damaged credit, the banks require a lot more verification, to put it bluntly, they don’t trust you and want you to back up everything that you have put down on your application.  This is also why most dealers require this information upfront before they even submit an application, I don’t know how many times I have seen a loan get approved only to have it put into decline status because income or job time didn’t match up with the application.   As mentioned before, your goal is to build trust with the lender, so don’t overstate your income, the bank is going to require your most recent pays-tub at a minimum, so they will know the facts soon enough.

Banks that deal with special finance customer generally have a list of requirements that need met before finalizing a loan: your most recent pay-stub, a bill showing proof of residence: a phone bill, a power bill, or something showing your name with you address(this again comes back to proving what you listed on your application), landlord name and number, and six complete references with name, address, and phone numbers.  By bringing these items in with you on your first visit to the dealer you have greatly increased your odds of getting an approval. 

Special finance is all about building trust with the lender, submitting the initial application with all the required information makes a very good impression with the lender, it shows them that you are serious about getting a loan, organized, and that you are taking the needed steps to secure a loan.  You’re much better off giving the lender the required information up front, they are going to require it anyways, so why make them ask for it.

Another way to improve your odds is to be realistic on the loan amount, if you have damaged credit, your chances of getting an approval on a $20,000 to $30,000 loan are very slim and most likely unattainable.  If you are more realistic and look for something with around an $8,000 max price, your odds have increased again.  It’s all about risk management with the lenders, they are willing to take a chance on you, but they are only willing to go so far, if they have to reposes a car their loss is likely to be much less on an inexpensive car.

Now here is the one of the biggest things that increase your odds of securing a loan, and that is down-payment.  As I have mentioned before it is all about trust and risk management with the lenders and money down helps with that criteria.  The first thing the bank sees with cash participation on your part is that you now have your own money invested in this car and more than likely you will not want to lose that money in a repossession.  The other part is the risk factor, let’s say you find a $6,000 vehicle and you just put $1,500 down, so you are only financing $4,500 with them, if they have to reposes it after 8 or 9 payment they have reduced their chance of loss significantly.

Obviously there are other factors that go into getting a loan, but if you do the things I listed in this post, you can overcome a lot of the problems associated with damaged credit and greatly increase your odds of securing a loan.