If you have bad credit and are a member of a credit union, you may be wondering if you should apply for a car loan through it or through a special finance dealership. Both are viable options, but visiting each of them may be the best path to take.

Getting a Car Loan from Your Credit Union

Should I Get a Car Loan from a Credit Union or Dealership?Credit unions are non-profits and require a membership. Anyone can join a credit union by opening an account, but eligibility depends on where you live or your affiliation with certain groups.

Although they’re direct lenders and use your credit score to determine loan approval, credit unions may offer lines of credit to members even if their credit score is less than perfect. Credit unions are known to be more lenient than banks.

Of course, it’s not a guarantee that they're going to extend an auto loan to you. Still, getting pre-approved through your credit union makes the loan process much easier on you, as it gives you a maximum loan amount and you can shop for vehicles in that price range from either a dealer or private seller.

If they turn your application down, your next step should probably be to find a special finance dealership to work with. Auto Credit Express can help you find one, but let’s explain what they are first, and how they’re different from a direct lender such as a credit union.

Auto Loans from Special Finance Dealerships

Special finance dealers specialize in helping consumers with poor credit. These dealerships work with subprime lenders – a type of indirect lender – who are willing to approve bad credit car loans.

These lenders have a number of requirements you need to meet. They use your credit score to qualify you, but subprime lenders also look to additional factors to determine approval such as:

  • Income – Subprime lenders generally require that you make at least $1,500 to $2,000 a month before taxes from one job. You have to prove this income with a recent computer-generated pay stub that shows your year-to-date income.
  • Residence – These lenders also require that you have a stable living situation. They require a utility bill in your name listing the address on your application to serve as proof of residence.
  • Phone – You must have a working phone so the lender can contact you. You have to prove this with a recent phone bill for either a landline or contract cell phone; they don't accept pre-paid phones.
  • Down payment – Subprime lenders also usually require a down payment. The general standard is a minimum of $1,000 or 10% of the vehicle's selling price, whichever is less, but this varies.

You can read about the documents needed to qualify for a bad credit auto loan here. It’s important that you’re prepared before you head to a dealer, and have all the paperwork ready to go.

The Bottom Line

You certainly can go to your credit union to get a car loan if you have bad credit. It's possible that they'll turn you down due to your credit, but this still leaves you with the option of visiting a special finance dealership.

Finding one of these dealers can be tough, and that’s why we want to help you get connected to one near you. Auto Credit Express is teamed up with a nationwide network of special finance dealerships that help borrowers with bad credit. We'll work to match you with a local dealer if you start the process by filling out our auto loan request form.