When you have bad credit and need an auto loan, you’re going to need to work with a lender that offers financing to bad credit borrowers. These are generally either subprime lenders or buy here pay here dealerships. In order to get approved for financing with them, you need to bring in specific documents that prove you’re willing and able to pay for the loan. However, these two types of lenders require different things in order to approve you.
Documents Needed to Buy a Car with Bad Credit
The best route to go if you need a car loan and are looking to improve your credit is to visit a special finance dealer that works with subprime lenders. These lenders run credit checks, but base approvals on additional factors.
In order to get approved for financing, you need to bring in specific documents that show you meet the lender’s qualifications, including:
- Proof of income – A recent computer-generated pay stub showing year-to-date income if you’re a regular W-2 employee, or two to three years of tax returns and bank statements showing net taxable self-employment or 1099 contract employment income. Subprime lenders typically require that you make at least $1,500 to $2,000 a month before taxes from a single job.
- Proof of residency – A recent utility bill in your name showing the address listed on the application.
- Proof of a working phone – A recent phone bill in your name that can be either a contract cell phone or landline, but prepaid phones aren’t accepted.
- A list of personal references – A list of five to eight personal references with names, addresses, and phone numbers.
Though technically not a document, also expect to be asked to make a down payment. The amount needed varies, but most subprime lenders ask that you make a down payment of at least $1,000 or 10% of the vehicle’s selling price, whichever is lower.
What about Buy Here Pay Here Car Lots?
Remember buy here pay here dealerships? They also offer bad credit auto financing, but don’t require nearly as much to approve you. Many of these dealers don’t run credit checks, which means they use your income and down payment to determine approval instead of your credit.
Similar to subprime lenders, they usually require an income of at least $1,500 to $2,000 a month before taxes, but it can be from multiple jobs. You can bring in a similar proof of income, such as a recent computer-generated pay stub, bank statements, or tax returns.
As for the down payment, how much you may need gets blurry. There’s no universally set amount. These places typically base the down payment requirement on the vehicle you choose to finance, so it can vary widely.
Ready to Find a Dealership to Work With?
Now that you know what you need to bring with you to the dealership, are you ready to find a local dealer that can help you get an auto loan? If so, The Car Connection is here to do the searching for you.
We specialize in helping credit-challenged car buyers find the financing they need by matching them to local dealerships with the right lending resources. All you have to do to get started is complete our free and easy auto loan request form. After that, we’ll get right to work connecting you to a dealer near you.