If you are looking to finance a car with damaged credit and no down payment, there are a few things you should know about subprime auto loans.

Buying a car can be a pleasant experience or a very stressful one - it really depends on why you need to buy and how much preparation you have done before visiting the dealership. Recently, we received a question from a prospective buyer who wants to know what his options are for financing a new vehicle.

The Question of Subprime Financing

subprime auto loan requirements
"Hi, I am a young man trying to get back and forth to work. The vehicle I was driving was given to me by my parents and was totaled in a car accident. I don't have enough money saved up to buy another car and my credit is not the best. Can you help me get at least a $3000 loan so I can purchase a used car?"

There are a lot of parts to this question, so we will do our best to answer as many of them as possible.

What we can definitively answer:

Let's start off with the primary question - "Can you help me get at least a $3000 loan so I can purchase a used car?" There are four parts to this question.

  1. Let's start off by explaining what we do here at Auto Credit Express. We are not a lender - we connect car buyers with damaged credit with auto dealerships that work with subprime lenders. To ensure our customers get the best deal possible, we only work with licensed car dealers and do not work with private sellers.
  2. Subprime lenders typically have a minimum financing amount of $5,000. This means that car buyers with bad credit should be able to afford the payments on a car loan of at least $5,000.
  3. The vehicle that is being purchased will need to fall into a typical subprime lender's guidelines, meaning that it will need to be 10 years old or newer and have less than 100,000 miles on it in order to qualify.
  4. The applicant will need to meet all of a lender's additional requirements for loan approval.

What we cannot definitively answer:

The buyer who contacted us also mentioned that the vehicle was given to him by his parents. Since it is unclear to us whether or not he made any payments on it himself or if it was completely paid for by his parents, we cannot determine if he has any previous car credit history for a lender to go on when determining approval. Having previous auto loan history can help a buyer's chances when seeking approval from an auto lender.

In the question, it was unclear what he meant when he says that he didn't "have enough money saved up to buy another car." Did he have some money set aside, but not enough to pay for another vehicle in full? We don't know. However, in most cases, subprime lenders want borrowers to have some sort of down payment available.

Preparation Is Key

What can borrowers do to prepare for a subprime auto loan? We have the following tips:

Check your credit.
Earlier, the young man who reached out to us mentioned that his credit was "not the best." When you work with a subprime lender, they will do everything possible to get you approved. At the same time, the circumstances that caused your current credit situation will affect the kind of loan terms a lender can offer to you.

Find out what documents the lender will need.
Before you meet with the dealer/lender, be sure that you have all the documents they will typically need to process your loan application. These are the basics:

  • A valid driver's license
  • 18 years of age or older
  • A legal resident of the United States or Canada (typical minimum is 6 months)
  • Proof of employment and income (paycheck stubs, employer contact information)
  • Proof of residence (such as a utility bill)
  • Personal reference list

There may be other things you will need to do in order to satisfy a lender's requirements, such as having a down payment or a cosigner.

A Helping Hand

Auto Credit Express has been in the business of connecting car buyers with problem credit with dealers that can help them for nearly two decades. Once you complete the secure, fast and obligation-free online application, we will connect you with a dealer in your local area that will do everything possible to get you approved and back on the road. Get started today.