People with a fixed income are forced to budget purchases. Banks have various requirements for an individual in determining whether or not to extend a loan. Fixed incomes can prove to be favorable for lending banks when the customer makes a decent and unchanging income. Those who make under $22,000 a year may find difficulty in obtaining a loan.
Credit History and Score
Credit history and score are of great consideration for a bank in determining whether to extend you a loan. Know your credit beforehand. There are websites which allow you to view your history for free. Along with your credit, the bank also considers how long you've lived at your residence. Your fixed income in comparison to your credit information allows the bank to gauge your debt-to-income ratio. If you have high balances on your credit cards and other revolving pieces of credit, you may not obtain an approval.
Monthly Payment Requirements
Using the debt-to-income ratio, the bank gauges your ability to pay based on a percentage of your income minus the bills you already pay. You cannot finance a loan with a $400 monthly payment on a $12,000 a year fixed income. When you apply for a loan on a low-end fixed income, a bank may decide that it can only extend you a loan that costs you less than $120 a month, or an amount that the bank sees fit. This can cause significant problems while shopping. Although the bank will lend you money, finding a loan for that amount may require significant money down or result in limited choices in vehicles.
Along with your monthly payment restrictions, you may find that you are extended a loan, but only if the vehicle financed follows the bank's guidelines. If your fixed income is under $20,000, the bank may request that you choose a vehicle with equity in it. Low income is a risk. The vehicle you can choose may have the following restrictions or similar: A vehicle less than two years old and no more than 45,000 miles. This is completely at the bank's discretion. Those on a fixed income with a decent annual income and an excellent credit score should not experience this issue.
If you have trouble finding a loan or trouble following the bank restrictions on payment and vehicle, you can attempt to find a cosigner. A strong cosigner, one with excellent credit and good income, will result in a loan with a low-interest loan without restrictions. However, those on fixed income should not buy more than is affordable.
Budgeting is recommended before shopping for a loan and a car if you're on a fixed income. A fixed income does not change. Make sure you consider all of your bills. Decide what is reasonably affordable to you every month. Consider gas and maintenance expenses. Make sure you determine whether or not the vehicle has a warranty and determine what the maintenance costs are. Decide if you have enough money saved if the vehicle should break down in addition to paying your monthly payment. If not, you should not buy a used car with a lot of miles without a warranty. Do not buy a vehicle with bad gas mileage if you plan to travel. Consider all aspects of your budget before deciding what you can afford.
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