Answer to 8 common questions about automatic subprime financing
If you’ve never financed a vehicle with the help of a subprime lender before, you might be wondering. Express auto loan has answers! We receive questions about subprime auto loans daily and have common solutions to help you navigate the subprime finance space.
1. Can I get a subprime car loan with really bad credit?
What is considered “very” bad credit is subjective, and the answer may vary depending on the lender you are working with. Typically, bad credit is considered a credit score below 660, and “really” bad credit can be considered a score below 500. However, what is usually most important to a subprime lender is this. that created the bad credit score in the first place.
For example, if you have bad credit after being recently released from bankruptcy, it will likely be considered situational bad credit. Situational bad credit is defined as bad credit resulting from a life event or events that cause damage to your credit reports. Many subprime lenders understand this and can help you in these situations. However, if you have bad credit because you missed too many payments on your loans in the past, it can be considered habitual bad credit, which can be more difficult to overcome.
The main concern of an auto lender is your ability to repay the loan. Your personal circumstances and what is reported on your credit reports are unique to you, and subprime lenders are equipped to work with many different credit situations if you can prove that you have the chops to pay off the loan on time.
2. Do I need a deposit?
Yes, you can expect a down payment requirement if you are applying for a subprime car loan. Almost all subprime lenders have this requirement; it’s usually at least $ 1,000 or 10% of the vehicle’s selling price (sometimes the lesser of the two).
A down payment can be made in cash, trade-in equity, or both. The sale price of the car you want to finance may also affect your down payment requirement. If you want a lower down payment, you may need to consider a more affordable car.
3. Do I need a co-signer for a subprime car loan?
Having a co-signer is not a general condition to qualify for a subprime auto loan. In fact, subprime auto loans are given to borrowers with poor credit, so a co-signer may not be necessary at all. The main purpose of a co-signer is to “lend” you their good credit rating, but subprime lenders are not as strict with credit rating requirements as other traditional lenders.
Generally, if you can only meet the other criteria for a subprime car loan, you may not need a co-signer to qualify for subprime financing.
4. Can I buy a new or used car?
Subprime lenders are registered with special financial concessions, so new and used cars are generally both options available to subprime borrowers. Your income and current expenses determine how much of a loan you are eligible for. In some cases, if you have the income to buy a new vehicle and qualify for a subprime auto loan, it can happen.
Usually, borrowers with bad credit have an easier time getting approved for a used car loan because the selling prices of used vehicles tend to be lower. Many new vehicles require a higher loan amount, so if you are keen on a brand new set of wheels, we recommend that you have a large down payment to increase your chances of getting approved.
5. How much income do I need to qualify?
Subprime lenders vary in their specific income requirements, but generally the key income requirement is around $ 1,500 to $ 2,500 in minimum monthly income from a single source. Subprime lenders generally prefer borrowers with W-2 income, but some are also willing to approve borrowers with 1099 income.
Another thing associated with your income is your work history. Most subprime lenders require that you have been in your current job for about six months to a year. Auto lenders need proof of how much you are bringing in each month and want to be sure that the income will remain constant throughout the life of the loan. The longer you work in your current job or in the same field, the more likely you are to meet your work history and income requirements.
6. Can I refinance a subprime car loan?
Yes, it is possible to refinance a subprime auto loan. Many bad credit borrowers want to refinance their car after a period of time, once they see an improvement in their credit score, as this may provide the opportunity to lower your interest rate and / or monthly payment.
Refinance lenders have their own vehicle eligibility requirements for refinancing, such as mileage, age, and age of your loan. For more information on typical refinancing requirements, you can read them here.
7. What interest rates can I expect to see?
It’s a very frequently asked question that we get here at Auto Credit Express, but there’s no easy answer. We are not a lender, however, we can tell you that borrowers who use our services charge an average interest rate of around 13%, according to our dealer network.
The type of vehicle you finance, your credit score and reports, the down payment amount and the loan amount all go into the interest rate you are eligible for. There is no one exact number that covers everyone. However, if your credit score is low, it may be possible to qualify for an interest rate of around 5% to 20% on an auto loan. Here are some ways to increase your chances of getting a lower interest rate on a subprime auto loan:
- Have a co-signer
- Have a big down payment or trade with equity
- Choose a newer vehicle
8. How do I find subprime lenders?
Finding a subprime lender begins with finding a dealer who has signed up with them. Dealers almost always have loan partners, but it’s not always clear who signed up with subprime lenders.
This is something that we want to help Express auto loan. We know how difficult it can be to find loan resources when your credit score is less than perfect, which is why we have created our national network of special financial concessions. We’ve been connecting borrowers to dealerships in their area for 20 years and we want to help you too.
To start the process of finding a dealership in your area, complete our car loan application form. It’s completely free, with no obligation, and we’ll get to work.