A bad credit auto loan is an auto loan designed to help people who don’t qualify for a traditional loan from a dealership, bank, or credit union. Bad credit auto loans go by many names, including second chance auto loans, bad credit auto loans, subprime loans, and bad credit auto finance, to name a few. One of these loans could be exactly what you are looking for if you are in need of a vehicle and have credit problems.
What Makes a Bad Credit Car Loan Different?
What differentiates a bad credit car loan from a traditional loan is that qualify for financing with bad credit takes into account factors in addition to your credit. This is not the case with traditional loans. With a traditional auto loan, if you don’t have good credit, you don’t get a loan, period.
Lenders who offer bad loans – called subprime lenders – know that things happen in life, and people with imperfect credit also need vehicles. That is why they rely on factors such as your ability, stability, and willingness to pay and successfully complete a car loan.
Let’s see what these three things mean:
- Capacity – Your ability to qualify for a car loan is based on your income and your job. Concretely, do you have enough disposable income to pay for a car loan and insurance?
- Stability – This is based on how long you have lived in an area and how stable your income and work history have been.
- Willingness to pay – Are you ready to pay off your loan and invest in your own success? Lenders look at your credit history to determine how you’ve paid off your loans in the past, and usually require a down payment as well. Bad credit lenders typically ask for a down payment of $ 1,000 or 10% of the vehicle’s sale price, whichever is less.
In order to provide the lender with proof that you meet the conditions for a loan, you must bring the documentation with you to the dealer. Bring:
- Proof of income – A current computer generated pay stub showing taxable income since the beginning of the year from a single source. Bad credit lenders generally require a minimum monthly income of around $ 1,500 to $ 2,000 per month before taxes.
- Proof of address – A current utility bill in your name at the address on the credit application. It simply confirms to the lender that you actually live at the address you provided on your loan application.
- Proof of a working phone – An invoice for a landline or contracted cell phone in your name (prepaid phones do not count). It’s a strange requirement, but bad credit lenders want to make sure they can contact you if they need to.
- A valid driver’s license – Subprime lenders generally require this as a means of confirming your identity. Valid means that your license cannot be expired or suspended.
- Personal references – A list of five to eight personal references with names, addresses and phone numbers at home and at work is also usually necessary. A lender may or may not contact your references as another way to verify information.
When you are funded with bad credit, not only do you get a car, but you also have the opportunity to improve your credit score. Every on-time payment you make on the loan adds to your payment and credit history, helping to boost your credit score over time.
How to get an auto loan for bad credit?
As mentioned, the best way to get a bad credit auto loan is to work with a subprime lender. These lenders only work through special finance dealers, and you cannot sit with them face to face. Instead, the dealership’s CFO works with the lender on your behalf.
These lenders can be difficult to find on your own, as the dealers who use them don’t always advertise them. TO Auto Express CreditWe work with a nationwide network of special finance brokers who are registered with lenders who offer bad credit auto loans.
Let’s take the hassle out of finding a dealership to work with. All you have to do is fill out our simple auto loan application form, and we’ll begin the process of connecting with a local reseller. Do not hesitate any longer, get started now!