Getting a hold of a subprime lender isn’t as difficult as you might think since they work through a dealership’s special finance department, but you won’t find subprime auto lenders everywhere.
Where Do You Find Subprime Car Loans?
If you’re unable to get approved for a conventional car loan through a dealership’s finance department or your local bank or credit union, looking for a dealer that has bad credit lending options could be your next step.
Finding a subprime lender means tracking down a dealership that has a special finance department. Subprime lenders are often called bad credit auto lenders, as well, since their expertise is in financing borrowers with less than perfect credit.
Subprime lenders are third-party lenders, meaning the dealer works with the lenders to get you financed. It could be as simple as calling around to your local dealerships and asking what lending options they have, and asking if they have special financing options. Here at The Car Connection, we also have a network of dealers that work with subprime lenders.
Be aware that there are differences in how the subprime lending process works, but we can guide you through that, as well.
Subprime Car Loans vs. Conventional Car Loans
The main difference between a subprime lender and a traditional car lender is how the financing process goes down.
A traditional auto lender is usually a direct lender such as a bank, credit union, or the captive lender of a car manufacturer. However, these lenders usually only work with borrowers with good credit scores. In most cases when you have good credit, you choose a vehicle you want to purchase, either from a private seller or a dealership. Then, you apply to a direct lender, get approved for financing, get a check for the car, then take delivery.
With a subprime lender, you need to find a dealer with a special finance department. You submit a credit application to the dealership, who generally sends it to a few subprime lenders. If there’s one that can work with your unique credit situation, the lender determines your monthly vehicle budget. From there, you choose a car that meets that budget, sign the loan documents, and take delivery of the vehicle.
The two processes may feel rather opposite, but with a subprime lender, the point of this process is to set you up for successfully completing the loan, since subprime lenders use more than just your credit score to determine your eligibility for a loan.
What Subprime Lenders Require
Once you find a special finance dealer, you’re likely to need some documents to verify the information you’ve listed on the credit application that was submitted to the subprime lender.
While every lender varies in their requirements, you can do a little legwork and prepare for these commonly requested items:
- Valid driver’s license
- Computer-generated check stubs
- Recent utility bill or bank statement in your name
- Contract cellphone or landline phone bill in your name
If you’re approved, you’ll need to provide these items as well:
- Down payment of at least $1,000 or 10% of the car’s selling price
- Five to eight personal references
The most difficult thing for many borrowers to do is saving for a down payment. It can be a large chunk of cash, but luckily, since subprime lenders work through a dealership, you can use a trade-in with equity to help meet this requirement! You can also combine cash and a trade-in.
Additionally, the larger the down payment you make, the less you pay in interest charges over the loan term. A sizable down payment can also widen your vehicle selection.
Finding a Subprime Lender
Now that you know what to generally expect from a subprime lender and how the process works, it's time to find one in your area. As we stated, special finance departments aren’t at every dealer. You could drive around, or spend time calling multiple dealerships, but that isn’t really necessary if you work with us at The Car Connection.
We’re teamed up with dealers across the country that work with subprime lenders. We connect bad credit, no credit, and other types of unique credit situations to these dealerships for free. To get started, simply fill out our free auto loan request form. It’s secure, quick, and there’s no obligation to buy.