Bad credit isn't always a deal breaker when trying to get approved for a car loan. You just have to make sure you're working with the right type of lender or dealership. Direct lenders, such as banks and credit unions, usually only offer loans to people with good credit. For consumers with bad credit, you have two main places to apply with, and we’ll explain what they are.

Subprime Lenders

Getting approved for an auto loan with bad credit is easier if you work with a subprime lender. These indirect lenders work through special finance dealers, and specialize in handling various credit situations. Subprime lenders use your credit to qualify you, but they also base approvals on other factors like your income.

The specifics vary, but you can typically expect subprime lenders to require these four things:

  1. Proof of incomeSubprime lenders have a minimum income requirement, which is usually around $1,500 to $2,000 a month before taxes. You need to bring in proof of income as well. Subprime lenders generally want a recent computer-generated pay stub showing year-to-date earnings, or recent tax returns if you’re self-employed.
  2. Proof of residence – Subprime lenders want to make sure you have a stable residence. Bring in a recent utility bill in your name showing the address listed on your application to serve as proof of residence.
  3. Proof of a working phone – Subprime lenders also want to make sure they can contact you, so they require proof of phone. Bring in a recent a phone bill; a landline or contract cell phone account is fine, but pre-paid phones typically aren't accepted.
  4. Down payment – Subprime lenders usually require a down payment. They generally ask for at least $1,000 or 10% of the vehicle's selling price, whichever is less.

On top of these four requirements, you typically need to have a list of somewhere around five to eight personal references. Include names, addresses, and home and work phone numbers. These are needed in the event the lender wants to confirm information about you or your car.

Buy Here Pay Here Dealers

You could also apply for a bad credit auto loan with a buy here pay here (BHPH) dealership. This is a type of in-house financing dealer, which means that instead of relying on third-party lenders, these dealerships finance loans for the vehicles on their lots themselves.

BHPH dealers generally don't check your credit, so your credit history isn't a concern to them. Instead, approval for a BHPH car loan is based on your income. This provides an advantage to people with bad credit or no credit who need to take out an auto loan.

You can expect to need to provide proof of income and a down payment. The down payment requirement at BHPH dealerships varies greatly. The only thing we can say for certain is that the required amount of money down is usually based on the vehicle you choose.

Another thing to keep in mind is that some BHPH dealers don't report loans or on-time payments to the credit bureaus. While a loan from a subprime lender can help you improve your credit score, this wouldn't be possible in this case. However, some do report timely payments, so make sure to ask about their reporting practices ahead of time.

Ready to Find a Dealership to Work With?

Now that you know that your bad credit isn’t always a deal breaker, where can you find the right dealership to work with? Through Auto Credit Express, of course!

We help consumers with less than perfect credit find financing by connecting them to local special finance dealers. Don’t drive around town looking for help, let us do the searching for you. To get started, simply fill out our free and easy car loan request form today!