When you're struggling with bad credit and need a car loan, it's important that you work with a lender that's right for your situation. Not all lenders can assist poor credit borrowers, but starting off your next auto loan on the right foot goes a long way toward getting you what you need when it comes to financing a vehicle.
What's Special Financing?
When you need to finance a car, your credit can sometimes stand in the way if you have little to no credit history or a low credit score. This is because lenders view bad credit as risky, which means many of them don't extend auto loan offers to people in this situation. However, if you're a borrower in a tough position, there are subprime lenders that are available to help people with less than stellar credit.
These are third-party lenders that are only found through dealerships that have a special financing department. Unlike banks and credit unions, which are considered direct lenders, you don't meet directly with a subprime lender. Instead, the dealer’s finance manager acts as a go-between for you and the lender, and all your financing is done with them at the dealership.
If you're approved for financing through a subprime lender, they let the dealer know what your maximum monthly payment can be, and what interest rate you qualify for. Before you're approved, though, you need to qualify.
Qualifying for a Bad Credit Car Loan
In order to qualify for a subprime car loan, you have to meet a number of stipulations that are set forth by the lender. The requirements for an auto loan can vary by lender, but they have similar qualifications for the most part.
The requirements for a subprime car loan generally include:
- Income and employment – Lenders need to make sure that you make enough money to pay for a loan, and that your income will last for the duration of your loan term. Subprime lenders usually ask that you can prove an income of around $1,500 to $2,500 before taxes. Most lenders require this to be W-2 income, and you typically have to meet the income requirement with a single source. Bring your most recent check stubs with you to the dealership as proof.
- Residency – Lenders need to know where you and the vehicle you're financing reside, and that you're in a stable situation. For this reason, lenders require you to provide proof of residency. Bring a recent utility bill or bank statement in your name with your current address to the dealer.
- Contactability – Lenders need to be able to contact you, so they require you to provide proof that you have a working landline or contract cell phone in your name. Prepaid phones aren't accepted as a valid phone.
These requirements are generally necessary to be considered for an auto loan by a subprime lender. However, there are a few more things you usually need to complete the process, such as a valid driver's, a complete list of personal references, and a down payment of at least $1,000 or 10% of a car's selling price.
Finding a Special Finance Dealership
Now that you know what it takes to be considered for a bad credit auto loan, you need to find a dealership that has connections to a subprime lending program. Because it's not always clear which dealers work with subprime lenders, driving around town searching can be a hassle.
But it doesn't have to be with The Car Connection on your side.
We've cultivated a network of dealerships that spans the country, and want to help connect you to a car lot in your area that’s signed up with subprime lenders. Skip the waste of time and money that blindly searching for an auto loan can cost, and fill out our fast and free car loan request form instead. We'll get to work matching you with a local dealer to get the process started on the right foot!