As a borrower looking for your next auto loan, it's important that you deal with a lender that fits your credit situation. Not all car loans are created equal, and not all lenders can work with credit-challenged borrowers. But this also means that you're not stuck just going to a buy here pay here (BHPH) dealership. These car lots usually cater to bad credit borrowers, but they're not always your only option.
Buy Here Pay Here Car Lots
A BHPH dealer can be an option, especially if you've recently been turned down by other lenders. These dealerships offer in-house financing – they're the lender, too.
BHPH dealers aren't as quick to check your credit, and many don't check it at all. This can seem like a wonderful thing if you're struggling and need an auto loan, but there's a trade-off for the dealership not taking your credit into consideration.
That trade-off is typically in the form of a high interest rate and large down payment requirement (generally around 20% of a vehicle's selling price or more). BHPH lots only sell used cars, and, in some cases, you could end up paying much more for a vehicle than its book value.
Private Vehicle Sales
Instead of going to a BHPH lot, you could consider buying from a private seller. This may work for you if you have enough cash to buy a car outright, but this is rare. If you're looking for a reliable vehicle, chances are you're going to need a direct loan from a bank or credit union in order to finance one from a private seller.
When you have poor credit, though, a direct loan can be difficult to get approved for. Banks usually reserve loans for customers with good credit. You could have better luck at a credit union if you're a member in good standing, but since they still base lending on credit scores, you're not likely to have an easy time.
If this option isn't open to you, you can still work with a dealership that specializes in helping people with less than perfect credit. These dealers are typically signed up with subprime lenders.
Try a Subprime Lender Instead
Subprime lenders are third-party lenders that work through the special finance departments at many dealerships, both franchised and independent. These lenders know that people who are struggling with credit challenges often need an opportunity to show that they're more than just a low credit score.
Subprime lenders give you this chance by looking into your income, employment, and residence stability to get a better picture of your financial situation. They still look at your credit score and reports, but these usually aren't the main focus. Instead, they base auto loan approvals on your ability, stability, and willingness to repay a loan.
Ready to Find a Dealership?
Sometimes, it can be difficult to tell if a dealer has a special finance department. You don't need to worry about trying to find one on your own, though. At Auto Credit Express, we're teamed up with a nationwide network of dealerships that are signed up with subprime lenders, and we want to help you find one in your area.
To get the process started, just fill out our free, easy, and no-obligation car loan request form. Then, we'll get to work matching you to a local dealer. There's never a cost to put in a request, and zero obligation to buy, so don't delay. Get started toward your next auto loan today!
