If you think you need a bad credit car loan, you might be right. But how do you know for sure? We have a few telltale signs that a subprime lender may be the way to go for an auto 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 one of the following scenarios:

You may need a bad credit car loan if …

  • … you're new to borrowing. If you've just started using credit it's possible that you have a lower credit score. When you're new to credit you have what's known as a "thin file" meaning there's not much there for lenders to base credit decisions on. People with thin credit files commonly have a credit score in the mid to lower end of the credit spectrum, which runs 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're not new to the world of credit and you have a credit score around 660 or below, you likely need a bad credit car loan. It's typically easier for borrowers with low credit scores to get financing through a subprime lender that specializes in working with credit-challenged consumers. Whether you're dealing with an unexpected event that led to a low score, or you've struggled to make consistent payments in the past, there are subprime lenders that may be able to help.How Do I Know If I Need a Bad Credit Car Loan?
  • … You have past repossession on your credit reports. Negative marks such as repossession and bankruptcy can weigh down your credit score for around seven years. Fortunately, the damage done by these lessens over time and eventually drops off. For major negative accounts such as auto loan default and subsequent repossession, you're likely to have a better chance of qualifying for a bad credit auto loan about a year or so after your car's towed away.
  • … you're in bankruptcy. When you're in bankruptcy, it's up to your trustee as to what you can and can't borrow. If you need a vehicle during open bankruptcy the chapter you filed may decide whether or not you're eligible for a loan. You may be able to get financing during Chapter 7, but since it's such a short process, many lenders prefer to finance after your bankruptcy discharge. In Chapter 13, however, there's a process in place for helping filers get a vehicle if necessary since that chapter takes either three or five years to complete. If you need a car during your bankruptcy you're not likely to find success with a traditional lender, however, and likely need to work with a special finance dealership and the subprime lenders they're signed up with.
  • … you've 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 can't seem to get approval through the captive lenders of some manufacturers, it might be time to look into a subprime auto loan. If you've already been turned down by a subprime lender, you may still be able to qualify for in-house financing with a buy here pay here dealer.

If you have a poor credit score, you may be tempted to pay cash for a car to avoid applying for an auto loan. Paying cash for everything doesn't do anything to resolve your bad credit situation, though. You don't have to skip the car loan, you just have to know where to go. And a subprime lender is probably what you're looking for.

Bad Credit Car Loans Are Different

By now you're probably saying to yourself, sure I fit into one of these scenarios, but what do I do about it? Bad credit isn't the end of the road when you need a car loan, you may need to shop for a car loan with the right lenders. Lenders that can help poor credit borrowers are called subprime lenders.

These third-party lenders are signed up with special finance dealerships 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 an auto loan by having a list of requirements they need to meet.

Each lender has their own set of qualifications, but in general, you should prepare:

  • Proof of income
  • Proof of residency
  • Proof of a working telephone
  • Five to eight personal references
  • Your valid driver's license
  • A minimum down payment 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 be prepared for when you visit a subprime lender. You should also know where your credit stands. Doing so gives you more bargaining power with a dealer because they can't blindside you with higher costs and interest rates if you do your research and know what to expect going in.

Ready to Get Started?

Needing a bad credit car loan is something that millions of Americans deal with every day. And, you're not alone with Auto Credit Express in your corner! We have been connecting credit-challenged consumers with local special finance dealerships for over two decades. We want to get you on the path toward your next, or first, auto loan by taking the hassle out of searching for a dealership. Simply fill out our fast, free car loan request form and we'll get right to work!