How do I know if I need an auto loan with bad credit?
If you think you need a car loan with bad credit, you might be right. But how do you know for sure? We have some telltale signs that a subprime lender may be the way to go for a car loan this time around.
Do you need a bad credit car loan?
Subprime is another term for bad credit and, you may need to work with a subprime lender for your next auto loan if you fall into any of the following scenarios:
You may need a bad credit car loan if …
- … You are new to the loan business. If you’ve just started using credit, your credit score may be lower. When you are new to credit, you have what is called a “thin file,” which means that there is not much that lenders can base their credit decisions on. People with poor credit records typically have a credit score between the middle and lower end of the credit spectrum, which ranges from 300 to 850 on the FICO scale, the most commonly used credit scoring model. If you’ve never borrowed before, a bad credit car loan may be what you need to start your credit history.
- … You have a low credit score. If you are not new to the world of credit and have a credit score of around 660 or less, you are probably in need of a car loan with bad credit. It is generally easier for borrowers with low credit scores to obtain financing through a subprime lender who specializes in working with troubled consumers. Whether you are dealing with an unexpected event that led to a low score or have struggled to make consistent payments in the past, there are subprime lenders who can help.
- … You have already repossessed your credit reports. Negative marks like repossession and bankruptcy can put a strain on your credit score for about seven years. Fortunately, the damage caused by these decreases over time and eventually disappears. For major negative accounts such as auto loan default and subsequent repossession, you will likely have a better chance of qualifying for a bad credit auto loan about a year after towing your car.
- … You are bankrupt. When you are bankrupt, it is up to your trustee to decide what you can and cannot borrow. If you need a vehicle during an open bankruptcy, the chapter you filed can decide whether or not you qualify for a loan. You may be able to get financing during Chapter 7, but because it is such a short process, many lenders prefer to finance after your discharge from bankruptcy. In Chapter 13, however, a process is in place to help registrants obtain a vehicle if needed, as this chapter takes three or five years to complete. However, if you need a car during your bankruptcy, you are unlikely to find success with a traditional lender, and you will likely have to work with a special financial dealership and the subprime lenders they have underwritten.
- … You have been turned down for a car loan. If you’ve been turned down by a traditional lender such as a bank, credit union, or online lender, or are having trouble getting approval from captive lenders from some manufacturers, it might be time to consider a subprime auto loan. . If you’ve ever been turned down by a subprime lender, you may still be able to qualify for internal funding with a purchase here, pay here.
If you have a bad credit rating, you might be tempted to pay cash for a car to avoid applying for a car loan. However, paying cash for everything does nothing to resolve your bad credit situation. You don’t have to skip the car loan, you just need to know where to go. And a subprime lender is probably what you are looking for.
Bad credit auto loans are different
By now you’re probably thinking to yourself that I fit into one of these scenarios, but what should I do about it? Bad credit is not the end of the road when you need a car loan, you may need to buy a car loan from good lenders. Lenders who can help poor borrowers are called subprime lenders.
These third party lenders are registered with special financing dealers and they look at more than your credit score to determine your car loan eligibility. They make sure that subprime consumers have the ability, stability and willingness to see through a car loan by having a list of requirements that they must meet.
Each lender has their own set of qualifications, but in general you need to prepare:
- Proof of income
- Proof of residency
- Proof of a working phone
- Five to eight personal references
- Your valid driver’s license
- A minimum deposit of at least $ 1,000 or 10% of the vehicle’s selling price
- Proof of auto insurance
These are just a few of the main requirements you need to prepare for when visiting a subprime lender. You also need to know where your credit is standing. This gives you more bargaining power with a dealership because they can’t blind you with higher costs and interest rates if you do your research and know what to expect.
Ready to start?
Millions of Americans face a car loan with bad credit every day. And you are not alone with Express auto loan in your corner! For more than two decades, we’ve connected consumers struggling with credit issues with local specialty finance dealers. We want to put you on the path to your next or first auto loan without the hassle of finding a dealership. Simply complete our quick and free auto loan application form and we’ll get to work!