Single mothers need a car to shop for groceries, get to work, or take their children to school. Purchasing a new car can be expensive for low-income single mothers on a tight budget. An easy way to finance your car is to get a car loan. There are both private and government car loans for single moms available throughout the United States that enable them to fulfill their dream of attaining car ownership. Similar to a home loan, single mothers qualified for an auto loan have to keep up their monthly payments.
Things To Consider Before Applying For A Car Loan
Many single mothers casually stop by the local auto mall to make a big purchase decision without paying much attention to loan financing options. While some research about vehicle preferences and loan financing options before making a first visit. Shopping around for auto loans before taking a car dealership can help you save significant money. To obtain an auto loan with the best possible and most affordable deal, it is essential to understand where you are standing financially and compare loans and talk to different lenders. Following are the things that single mothers should consider before making an informed decision.
1. Determine The Car You Can Afford
Single mothers need to determine a car they can afford, so they must take their monthly costs, car loan payments, gas/ maintenance, and insurance into consideration. In addition, you need to look at your monthly debt obligations like mortgages, student loans, or credit cards. Lenders consider your debt-to-income ratio before finalizing your loan application. Typically a debt-to-income ratio below 40% is considered good.
2. Check Credit Scores
Before making a significant purchase decision, like buying a car, it is essential to check your credit scores for at least three to six months before making an informed decision. Credit score ratings required for a car loan approval may differ depending on your lender. Some lenders approve loan applications for single moms having low credit scores; however, they come with higher rates of interest and less favorable terms.
3. Shop For Car Loans
Single mothers must shop around to get the best car loan deal just as they shop to get the best price on the car they want to buy. This will help them to secure the best rate of interest on auto loans. While shopping for a car, it is significant for single mothers to seek different lenders to get the most favorable terms and lower interest rates. Multiple sources can help you to secure a car loan, including banks, credit loans, car dealers, and online dealers.
4. Getting Pre-Approved For Car Loans
Single mothers willing to get car loans through a credit union or a banking institution can get pre-approved. Getting approval for auto loans requires completing a preliminary application with a lender who will scrutinize your financial information and credit scores. They will also help you learn how much loan they can finance and the rate of interest they are likely to offer. Getting pre-approved for car loans will help single mothers to get the best interest rate and learn how much they have to spend.
What Are The Requirements To Avail Car Loans For Single Moms?
Following are the documents and information that you may have to provide to avail of car loans:
1. Proof Of Income
Credit unions, banks, and lenders will ask for proof of income to confirm you are in a position to repay the loan. You may have to provide recent bank statements or pay stubs to confirm your income.
2. Government Issued ID
Car loan borrowers must provide government issue identities, such as a driver’s license or passport, when applying for car loans.
3. Proof Of Residence
Single mothers may have to give proof of residence which includes their current lease, utility bill, or mortgage statement.
While online lenders may help you to get a loan immediately, credit unions and banks may take long weeks to approve your loan application. Once approved, you have around 30 days to find the car of your dream and finalize your loan.
How Can Single Mothers Get A Car Loan With Bad Credit?
Single mothers who have poor credit scores or negative information in their credit reports can take a lot of steps to improve their credit scores before applying for a car loan. Improving credit scores will increase your chance of qualifying for auto loans at the best rates and terms. You can take the following steps in case you are looking to get a car loan with bad credit.
- Paying your monthly bills on time
- Bringing any late collection accounts and all payments current
- Paying your existing debt to improve the credit utilization ratio
Single mothers with poor credit reports and scores looking to turn their car ownership dream into reality can avail of loans, however, at higher interest rates. Single mothers can offset the impact of poor credit by making more significant down payments. Down payment will lower the amount single moms can borrow and, subsequently, the interest rates on the life of the loan.
How To Get Loans For Cars As A Single Mom?
As a single mom, it is essential to find the best terms and rates on car loans so that you can save hundreds to even thousands of money in interest payments. As the cost of car insurance premiums and interest rates are rising each day, it has become critical to shop around and compare rates of different lenders to get the most affordable and accessible car loan for your used or new car. An auto loan is a secured installment loan where your vehicle will act as collateral and will be subjected to repositioning in case you default on your loan or stop making payments on time. Single mothers can find car loans at a car dealership, online lender, credit union, or bank. Single mothers looking for car loans can choose the following option.
1. PenFed Credit Union
It is a credit union that offers low car loan rates for new and used cars through PenFed car buying services. Single mothers who want to use these services must become credit union members and pay a minimum deposit of $5. Borrowers unwilling to use the PenFed program to purchase a car can still secure loans at low or average rates on their new or used cars outside benefit PenFed services. Single mothers looking for car loans can avail PenFed car buying services, where the APR starts at 4.59% for new cars, while for used cars, it is 5.54%. Loans outside PenFed car buying services may vary between 5.39% for new car loans and 6.04% for used car loans. Penfed credit union sponsors an amount of $500 to $150,000 to eligible candidates so that they can purchase a new or used car. The loan repayment term varies between 36 to 84 months based on your chosen loan type. With nationwide availability, no prepayment penalties, and flexible loan repayment terms extending to seven-year, single mothers can quickly secure an auto loan through PenFed.
2. Consumers Credit Union
It is a credit union based in Illinois which has opened membership nationwide in recent days. The auto loan rates for vehicles constructed before 2021 are average, while new car loan rates can be a fantastic deal for single mothers willing to purchase a new car. It provides significant flexibility in terms of loan repayment. The loan amount from consumers’ credit unions ranges between $2500 to $100,000. The APR rate for cars constructed before 2021 or new cars is 5.24%, while for cars constructed between 2017 to 2020 is around 5.49%. The APR rate for single moms who are purchasing old car models that were constructed during 2016 or are much older is 6.54%. The loan repayment term period ranges between 36 to 84 months.
3. Bank Of America
Bank of America is one of the largest banks globally, offering widely available auto loans at competitive rates. Single mothers need not be a member of the bank to avail the auto loan services; however, members can qualify for additional benefits and special perks. For instance, single mothers who qualify for the Preferred Rewards Program by Bank of America will get up to 0.5% off on their APR. The starting APR for new car loans is 5.39%, while for used cars, it is 5.59%. The APR for privately party loans is 8.29%. The Bank of America provides a loan amount ranging between $7500 to $100,000. The loan repayment term ranges from 48 months to 72 months. The loan policy of Bank of America may lack variety. For instance, the bank provides one of the least flexible loan terms, and the shortest loan term can be set for 48 months. The minimum financing amount is around $7500, which makes Bank of America an excellent loan financer for single moms looking for inexpensive used vehicles.
This is an online lender which provides low rates of interest for private-party car loans. The loan terms and amount are of average flexibility. This online lender provides a wide variety of car loan options and does not limit car mileage, model year, etc.; this makes it an ideal car loan lender for borrowers or single mothers willing to buy an old car model. Lightstream provides a simplified operation process that includes same-day funding if candidates can fulfill all the eligibility criteria. The car loans provided by Lightstream are unsecured; therefore, in case you default on your loan payments, then your car will not be repossessed, although your credit score ratings may suffer. The car loan amounts funded by Lightstream range between $5000 to $100,000, with a loan term ranging from 24 months to 84 months based on the type of loan you are availing.
Carvana is popularly known for its used car shopping experience online. However, it also provides various auto loans if you purchase cars on its official website. The eligibility criteria for Carvana are that you must be more than 18 years old, earn at least $10,000 a year, and have no active bankruptcies. Carvana is a popular option among single mothers with poor credit scores who cannot obtain car loans from other sources because of their damaged credit history and score ratings. The online model of Carvana combines purchasing and financing experience; therefore, single mothers can purchase used cars without much hassle. The car loan amount may vary depending on the eligibility criteria, and the loan repayment period ranges between 36 and 72 months. The starting APR is at 6.85% for used cars.
Purchasing a car is the most significant decision you will make as a single mom after buying a home. Before applying for a car loan, it is essential to understand the loan requirements, the credit score that may affect your loan amount, and how obtaining an auto loan can influence your finances and credit. Single mothers can apply for car loans through lenders, credit unions, or banks. Irrespective of which option you choose, you need to fulfill minimum eligibility requirements that may differ depending on your location and the lender.