If you’ve already found the car you want and you need financing, it’s going to largely depend on your credit score and what type of lender you work with. Sometimes, it's not possible to get approved for an auto loan with a specific vehicle if you have bad credit because of the way the subprime financing process works.
Your Credit Score and Auto Loans
If your credit is in good shape, finding a lender to work with is rather straightforward. With a good credit score, you’re more likely to get approved for a car loan from a direct lender, such as a credit union, bank, or online lender. You're also more likely to get financed from a captive finance company, which is an automaker's lending division.
A borrower with good credit who has already found the vehicle they want and meets lender requirements can:
- Talk things over with a direct lender or a captive finance company.
- Give the lender the car’s information.
- Get the check from the lender for the vehicle.
- Obtain auto insurance.
- Then take delivery of the car from the private seller or dealership.
Additionally, a good credit borrower could choose a vehicle from a dealer, and finance directly through the dealership’s finance department, and then take delivery of the car.
However, if you have bad credit, many traditional auto lenders may not approve your loan application. You may need to work with a subprime lender if your credit score isn’t high enough to meet a traditional auto lender’s standards. This means taking a different route to car buying, and you may need to be more flexible on your vehicle choices.
Financing a Car With Bad Credit
With a bad credit car loan, the process of financing a vehicle is almost the opposite of what it is with a traditional auto loan.
First, you need to submit proof that you qualify for a car loan to a subprime lender that works through a dealership’s special finance department. If the lender approves you for financing, they send the dealer a payment call, which outlines a maximum monthly loan payment you qualify for based on your credit and financial situation.
From there, you work with the dealership to find a vehicle from their current stock that fits within the lender’s guidelines. Though you can certainly work with the dealer to find a car that both fits within your payment call and meets your personal needs, now isn't the time to finance your dream car.
Instead, have a few makes and models in mind, and find those that are similar. Take some time to research different vehicles that you like which fit your personal needs and budget. This way, if you’re approved by a subprime lender, you have a rough idea of the type of car you want.
Additionally, with a subprime auto loan, you can improve your credit score for future loan opportunities. If you make timely loan payments every month, your credit score can rise. This means that down the line, you may be able to finance with a direct lender and qualify for better loan terms, with more freedom in choosing the dealership or private seller to work with, and for the kind of vehicle you’d prefer.
Finding a Bad Credit Auto Loan
Although you may have found the car you’d like to purchase, it may not be possible to get financed for a specific vehicle if you’re struggling with credit issues. Finding a subprime lender could be your next step in getting a reliable car from a dealership. With timely payments, you can increase your chances of getting approved for the exact vehicle you have your eye on in the future.
To find a subprime lender and start car shopping at a dealer in your area, we want to help. At Auto Credit Express, we know which dealerships have special finance departments that work with bad credit lenders. Simply complete our free auto loan request form. It’s completely secure, online, and we look for a dealer that’s near you.