It’s been a rough summer, long work commutes and big potholes have really put a beating on your ride. You would never dream of taking your vehicle on a cross-country trek, and your teeth chatter just thinking about how long it takes your heater to warm up in winter. Sounds like you need a new car.
What’s that, you say? Your credit is really bad, you keep getting turned down and you just know that no one will approve you? Well, my friend, it looks like you just need to be pointed in the right direction. Here at Auto Credit Express, we can help with that.
The Truth about Bad Credit Car Buying
The fact is, buying a car with bad credit can be a challenge. You may face many bumps along the way such as a high interest rate, limited vehicle selection, and down payment requirement. But, all of these things can be overcome with a little preparation—and the right dealer.
When you need auto financing and have poor credit, the answer is a subprime auto loan. These differ from traditional loans in a few key ways. Most subprime lenders are not direct lenders and work mainly through dealerships that are signed up with them. People with bad credit will most likely have to go to a dealership first because it's difficult to get pre-approved if you have credit challenges.
Like a traditional loan, once you have picked a vehicle and gotten financing, you will have to provide certain documents to the dealership: a driver’s license or state ID, and proof of insurance for the vehicle. Unlike a traditional loan—because buyers with low credit tend to be a higher loan risk—you will also need to bring some additional documentation.
What Does the Dealer Need?
The lender will judge your loan risk by looking at how stable your income is, your employment history and how long you have lived in the area, among other things. They will also look at your ability to pay for the car loan based on your income, bills and how likely you are to pay back the loan based on your credit history.
As a borrower with credit challenges, you will have show the lender proof that you earn what you say you earn, and that you live where you say you live. Along with this documentation, there are two other things you will need to provide to a subprime lender that may surprise you: proof of a working phone and a list of personal references.
Let’s look at the four things—known as stipulations—that you will need to provide to a dealer to get a subprime auto loan.
- Proof of income – This must be in the form of a computer-generated check stub. It must be current, show year-to-date income, and your wages must be reported on a W-2 form at the end of the year (most subprime lenders have a problem with income like SSI and disability).
- Proof of residence – This must be a current (within the past 30 days) utility bill in your name, showing the address used on the application. A good tip: make sure your bill is up to date. It may not look so good to a lender if the bill you are using as proof is 30- or 60-days past due. Also, most lenders will require your rent or mortgage to be current.
- Working phone – This must be a landline or contract cell phone from a national carrier, in your name. Prepaid cell phones can’t be used. As lenders sometimes say “No phone, no loan!” This is so they can reach you if something happens, such as missing a payment.
- References – This typically should be a minimum of six people, with full names, addresses and phone numbers. They can be co-workers or friends, but some lenders prefer you to use relatives. The one rule is that they cannot live at the same address as you, and each must have a different address.
The Bottom Line
Now that you know what to expect, you can start to research your next vehicle. Let Auto Credit Express help you get started by connecting you with a local special finance dealer who has the lenders available to work with bad credit situations. It’s simple to take the first step, just fill out our obligation-free online auto loan request form today!