Getting a bad credit car loan can take more work than getting an auto loan with good credit. We have encouraging news for you though – at The Car Connection, we make it our mission to help borrowers get matched with local dealerships that are signed up with subprime lenders.
We can take the hassle out of finding a dealer, but you need to be prepared for the bad credit borrowing process before you can drive away with a car loan. Let's take a look.
What's Considered Bad Credit?
The first step to any car-buying situation is to check your credit score and reports. The cutoff for good credit is typically 670 on the FICO scoring model. Anything lower is liable to be considered bad credit, which means you're likely to have an easier time qualifying for an auto loan through a subprime lender.
What's a Subprime Lender?
Subprime lenders are ready to work with borrowers who have less than perfect credit, no credit, or even those who've gone through bankruptcy. They're different from traditional lenders because they evaluate you on more than just your credit score.
- Subprime lenders look at your income and employment to see that you can repay the loan as promised, and you provide check stubs as proof.
- They ask you to prove you have stable living where the vehicle will reside, by bringing in a utility bill or bank statement in your name.
- They require that you're willing to invest in your loan by making a down payment.
All lenders vary in their requirements, but the documents we listed are typically standard in starting the process of getting a bad credit car loan.
The Bad Credit Car Loan Process
When you're dealing with lower credit scores, it's important to know that the car buying and financing process is almost the opposite of that of a good credit borrower.
With a credit score above 670, you're more likely to qualify for financing through a direct lender such as a bank or a credit union. You're also likely to qualify for a lower interest rate, a shorter loan term, or a larger loan, or a bigger selection of vehicles.
As a bad credit borrower, you can't always walk into a dealership, pick out a car, and know you qualify for financing. In this case, you need to qualify for financing first. Choosing your car comes later, from a selection of vehicles that the dealer presents to you based on their payment call with the lender. Qualifying for an auto loan with bad credit typically means meeting lender requirements such as:
- Income of at least $1,500 to $2,500 from a single source
- Have been employed at the same job for at least six months to one year
- Have verifiable residence
- Have a valid driver’s license
- Present a list of personal references
- Present a down payment of at least $1,000 or 10% of the vehicle's selling price
Requirements vary by lender, so be sure to be as prepared as possible. You may be required to present more or less documentation, be asked to make a larger down payment, or be asked to provide a cosigner in order to qualify. Check with the dealership for lender stipulations before applying.
Finding the Right Path Toward Your Next Car
When you have bad credit a car loan isn't out of reach. You just need to make sure you're working with a dealership that has lenders to handle many different lending scenarios. If you're not sure where to turn for your next car loan because of bad credit, we want to help.
The Car Connection has a nationwide network of special finance dealerships that are signed up with subprime lenders. We can get you connected to a local dealership to save you the time and trouble of hunting down a special finance dealer on your own. The process is fast, free, and never has any obligation. Simply fill out our car loan request form and we'll get right to work for you.