If you’ve struggled to maintain a good credit score, but need an auto loan, an in-house financing dealer could be what you need.
Dealerships That Assist With Bad Credit
Not every dealership out there has resources to assist borrowers with poor credit. Dealerships with in-house financing can help in a big way, though.
One of the most common reasons for a car loan denial is a low credit score. Creditworthiness – how well you’ve proven your ability to repay loans – is important to a traditional auto lender. The better your credit score, the more likely you are to get approved for vehicle financing. But an in-house financing dealer may not check your credit at all.
As the name suggests, you can walk into an in-house financing dealership and apply for financing there. The dealer plays a double role: dealer and lender. Most car lots with in-house financing are independently owned, so they have their own lending process and may not check your credit before approving you for a car loan.
Dealers that have in-house financing are also called buy here pay here (BHPH) lots, or tote the note used car dealerships.
How In-House Financing Is Different
Most franchised or traditional dealerships have lending partners such as credit unions, banks, subprime lenders, or the captive lenders of automakers. If you apply for financing at a traditional dealership, your application may get sent to multiple lenders at once, but it’s likely that your credit reports are prioritized. If your credit score doesn't meet the requirements of a lender, you’re liable to be denied financing.
However, in-house financing dealers don’t use third-party lenders. They don’t need to wait for an outside lender to approve or deny your loan. As a result, the lending process can be quicker, more convenient, and borrowers with tarnished credit histories are more likely to get an auto loan approval – provided they meet the other requirements.
Another major difference between in-house financing dealers and traditional ones is that BHPH lots only sell used vehicles. They may also offer rent to own (also called lease to own) agreements for used cars.
One other thing – where there isn’t a credit check there usually isn’t a chance for credit repair. A lender that doesn’t pull your credit reports during the auto loan process isn’t likely to report the loan or your on-time payments to the credit bureaus. Without your loan or payments being reported, your credit score can’t benefit from your good loan management. If you want your credit to improve from a car loan, ask the lender about their reporting practices.
Common In-House Financing Requirements
Since BHPH dealers operate independently, they’re bound to have different requirements to qualify for an auto loan. However, most auto lenders require some basics that you can expect:
- Valid driver’s license
- Proof of residency
- Working phone
- Enough income to repay the loan
- Down payment
In-house financing dealers usually require check stubs or proof of employment, and some cash down to get approved. Since many of these dealerships skip the credit check, you may have to have a down payment of around 20% of the vehicle’s selling price. But since BHPH dealers only sell used cars, meeting that down payment requirement could be manageable.
Another Bad Credit Auto Loan Option
If you’re looking to prioritize credit repair and need a car loan with poor credit, then subprime financing is another option to consider. These lenders do review your credit reports, but they specialize in working with credit-challenged borrowers.
They’re third-party and signed up with special finance dealerships. Your credit score does have an impact on your eligibility, but it’s not as important as your ability to pay or stability. Subprime lenders look for stable borrowers with steady incomes and consistent work history, secure living situations, and ask them to have a down payment. Often, the down payment requirement is at least 10% of the vehicle’s selling price or $1,000.
What sets subprime lenders apart from BHPH dealerships is that subprime car loans are reported to the credit bureaus, giving you a shot to repair your credit. By making the auto loan payments on time, you can pull yourself out of the bad credit cycle and save yourself cash when you need to finance. A better credit score means better approval odds overall and a better chance at qualifying for a lower interest rate next time around.
Need Dealer Connections? We’ve Got ‘Em
At Auto Credit Express, we’ve cultivated a coast-to-coast network of dealers that are willing to assist borrowers with poor credit. Instead of driving all over town and hoping you catch a dealership that can approve you with credit challenges, let us do the legwork for you.
We’ll look for a dealer in your local area that has bad credit lending resources. Fill out our free auto loan request form, and we’ll get right to work helping you get back on the road.