When you need special financing, it typically means that you have bad credit. This often means that you're forced to look for alternate routes when it comes to getting something you need on credit, like a car loan. However, you don't have to take a shot in the dark because The Car Connection is here to light your way by showing you where to go to get a special finance auto loan.
What Is a Special Finance Auto Loan?
The threshold for what constitutes special financing varies by lender. Traditional lenders – such as banks, credit unions, online lenders, and some captive lenders – usually only work with borrowers who have good credit.
When you apply for a car loan with a direct lender, your credit score directly impacts your chances at an approval. Without a high enough credit score, you're not likely to be approved with many traditional lenders.
If your credit score falls below around 660, you're typically considered a bad credit borrower. This means turning to alternative methods of getting a car loan other than traditional auto lenders. Fortunately, there are plenty to choose from! Even some direct lending options, such as credit unions, may still be on the table depending on your situation.
Special financing dealerships are signed up with subprime lenders that can help people in many credit situations. These lenders look at many factors to get you a car loan, not just your credit score. Many dealers across the country have both traditional and special financing options for borrowers. However, it can be difficult to pick these dealerships out of a crowd since they don't always stand out with a flashing neon sign that says "we do special finance."
With decent credit, getting approved for auto financing may not worry you. But, if you're dealing with less than perfect credit, it's important to seek a car loan from the right kind of lender. Getting turned away by traditional dealers and lenders that don't have the resources to work with your credit score only serves to bring it down more. We can point you in the right direction!
Where to Go for a Special Finance Car Loan
When you need to find special financing for your next vehicle, you generally have to find a dealership that's signed up with lenders who assist people in many types of credit situations. Occasionally, this is with a captive lender or a direct lender at a bank or credit union.
With credit that's walking the line between good and bad, a credit union can be a good option if you're a member in good standing. But more often, you're going to have better luck from a special finance dealer or a buy here pay here (BHPH) car lot.
Special financing dealerships are signed up with subprime lenders.
These lenders know that you're more than just a credit score, so they use other factors in addition to it to help get you approved for financing. Things like your income, work history, residence stability, and willingness to make a down payment all play a part in your approval.
You also need to provide the lender with documents such as computer-generated check stubs, a utility bill and phone bill in your name, a valid driver's license, and a list of personal references. You don't actually meet with the lender, but bring these things and any other required paperwork to the dealer with you.
BHPH dealerships aren't signed up with third-party lenders because they're both the dealer and lender in one.
You can only get used vehicles at a BHPH lot, but they can be a good place to start if you need a car and can't meet subprime lending requirements. Often, these dealerships don't check your credit reports or score since they're the ones deciding whether or not to extend you financing.
The trade-off for not checking your credit is typically a higher than average interest rate and a down payment requirement. Instead of relying on your credit for approval, BHPH dealers are more concerned with whether or not you can make your payments – which could be due monthly, biweekly, or weekly.
One additional drawback to consider is that BHPH dealerships may not report your timely loan payments, which means you wouldn’t be able to improve your credit score. An auto loan from a subprime lender, though, is always reported. If you’re looking for a car loan that can repair your credit, ask about a BHPH dealer's reporting practices beforehand.
Build Credit With a Special Finance Auto Loan
An auto loan from a special finance dealer is a great way to jump-start your credit! Car loans that go through these lenders are reported to the three major credit bureaus: TransUnion, Experian, and Equifax. Each on-time payment you make adds to your payment history – the biggest factor that contributes to your credit score.
The additional requirements of a subprime lender ensure that you can get a loan that works for you, one that doesn't overwhelm you or make you go broke just to afford a daily driver. If you're ready to find your next vehicle and boost your credit with an auto loan, we're ready to assist!
Here at The Car Connection, we've gathered a nationwide network of special finance dealerships that are signed up with the lenders you need. Whether you're experiencing bad credit, no credit, or have been through a bankruptcy, a subprime lender could be light at the end of the bad credit tunnel. To find one in your area, fill out our car loan request form. There's never any obligation, so start today!