How Can Single Mothers Get Approved for a Car Loan?
One of the most difficult groups of people to get approved for loans is the group of single moms.
Lenders know that single moms typically have low income and big expenses, both of which are considered as red flags for financing. Even if you receive child support, you still pay for the majority of the upkeep of your child and home.
But a reliable car is a not just a want but a need. You need your own ride to bring your kids to and from school. You also need it to go to work and run errands.
But late-model cars are often the most reliable ones. Choosing an older car may be budget-friendly at first but repairs and maintenance could be costly over time.
Fortunately, there are a few lenders today that offer auto loans for single mothers.
First of all, you have to understand that your financial situation won’t get you into a car loan that easily. Lenders are looking for steady income if not excellent credit. If you don’t have both, it will be difficult to get approved for an auto loan.
But there are several ways to make lenders say yes.
- FIND OUT YOUR CREDIT STATUS. Get a copy of your credit report before applying for any credit. You are entitled to a free copy every 12 months via AnnualCreditReport.com. So don’t hesitate to pull one out.
- ELIMINATE DEBTS. Pay down as much debt as you can. Lenders do not just assess your ability to make money but they also compare that against your expenses and liabilities. Your application will look better if you don’t owe that much.
- ASK SOMEONE TO BE YOUR COSIGNER. A cosigner lessens credit risk. He or she, though, must have excellent credit in order to qualify.
- PUT DOWN A BIGGER AMOUNT FOR THE INITIAL PAYMENT. A bigger down payment helps anyone get approved for a loan because it’s like showing lenders that you are capable to pay the loan back. It also gives them more security.
Auto loans for single mothers are a kind of high-risk loans. If they are not managed well, they’ll cause great damage to your credit and finances.
You can avoid this by following these practical tips:
- Get into another job or a business. You need to earn more not just to get approved for a loan easily but also to have enough cash for your car payments. You can get into a part-time job or sell stuff. You can also turn your hobby into a lucrative business.
- If your budget is stretched to the limit, look for ways to cut your expenses. Perhaps, you need to downsize your food expenses, clothing allowance, groceries, etc.
- Talk to only legitimate lenders. You may not know it but there are a lot of unscrupulous lenders out there. They take advantage of people who have poor credit and low income and are desperately looking for a car.
- Check out organizations that support single parents. Sometimes, these groups give away free cars to single moms. If you find one, there’s no need to get an auto loan or look for cash to purchase your own ride. But take note that these cars came from donors so don’t expect them to be brand new.