Special financing is designed to assist borrowers with poor credit get auto loans. The process is a little different from traditional vehicle financing, so let's clear the fog.
Special Financing Process vs Traditional Car Loans
If your credit score has seen better days, or you haven’t been able to build up a decent credit history, then special financing could be the way you get into a car loan. Special financing is just another word for bad credit auto loans, and they’re often given by subprime lenders.
Subprime lenders are signed up with special finance dealerships and they’re third-party, so you never meet them in person. Instead, the special finance manager at the dealership works with you through the process and acts as the middleman between you and the lender. You submit your information to the finance manager, who sends it along to their lending partners (many dealers are signed up with multiple lenders).
If you’re approved for financing, the lender that accepts your application sends a payment call to the finance manager. This outlines what you qualify for, including your maximum monthly payment and interest rate. Once you have that information, you shop for a vehicle with a dealer and complete the buying process with them before taking delivery.
Compared to the traditional auto loan process, this is somewhat backward. Often, when you work with a traditional auto lender, you choose your vehicle first then secure the financing. But with special financing, the goal is to set your auto loan up for success and make sure you can handle the new credit based on your current financial situation. Traditional auto financing usually requires a higher credit score as well, making it hard for borrowers with credit challenges to make the cut.
Since subprime lenders want the clearest view of your financial situation, they look at more than just your credit score. This makes it possible for borrowers with credit issues to qualify to get the car loan they need.
The Requirements of Special Financing
It’s important to note that every lender is going to vary in their specific requirements and what they can extend to you in terms of financing. However, here at The Car Connection, we’ve been affiliated with special finance dealerships for over 20 years, and we know some of the basic requirements that most subprime lenders abide by.
Here are some basic stipulations you may need to meet:
- Income – Most subprime lenders require that you make around $1,500 to $2,500 a month, before taxes. Must be provable income, supported by recent computer-generated check stubs or tax returns.
- Driver’s license – Mostly used to verify your identity, but also allows you to test drive vehicles, register the car in your name, and double-check your home address. Your license can’t be suspended, revoked, or expired.
- Living situation – To qualify for special financing, most lenders require that you’ve lived at a permanent address for around one year. Prove your residence with either a recent utility bill in your name or a recent bank statement.
- Down payment – Where there’s bad credit, down payment requirements are likely to follow. Most subprime lenders require at least $1,000 or 10% of the vehicle’s selling price (sometimes whichever is less).
- Contact information – Lenders need your personal contact information in case they need to ring you. Must have a contract cell phone or landline phone, proven with a recent phone bill in your name.
- References – In case the lender can’t contact you, subprime lenders typically require around five to eight personal references with complete contact info (name, address, phone, email, etc.). These references can be anyone that doesn’t currently live with you.
If you can meet these baseline stipulations, then special financing could be in your future. Some lenders may require more or less items, depending on your unique circumstances, but these are common in our dealership network.
Let’s Help Get You Back On the Road
Here at The Car Connection, we’re dedicated to helping borrowers get connected with dealerships that have bad credit lending resources. Using our coast-to-coast network, we’ll look for a dealer in your local area that’s signed up with subprime lenders.
You can complete our quick and free auto loan request form, and we’ll get right to work matching you to a dealership. There’s never an obligation, so get started now!