When you finance a vehicle, the loan terms are largely dependent on your personal situation, the car, your credit, and what you bring to the table. But if you want a basic idea of what other subprime borrowers are getting qualified for, we have some answers.
Average Bad Credit Auto Loan Terms
Here at Auto Credit Express, we’ve created a network of dealerships all over the country, and we work to match borrowers that need bad credit financing to these locations at no cost.
We’ve surveyed our dealers that are signed up with subprime lenders to get a better idea of what loan terms bad credit borrowers are qualifying for.
According to the dealerships we surveyed, these are the average loan terms for a subprime auto loan:
- Average interest rate: 13.16%
- Average amount financed: $23,842
- Average down payment: $2,066
Keep in mind, these are just averages – not a prediction of what you’re going to qualify for. Your personal situation, income, and the subprime lender determine what you can get, but these loan terms are reflective of what many bad credit borrowers are getting.
To dive into these averages, one thing we noticed is that subprime borrowers have been getting lower interest rates since the start of the coronavirus pandemic. Pre-coronavirus, our dealers stated that subprime borrowers were averaging around a 15% interest rate. Just this year, we’ve seen subprime borrowers getting a 2% decrease in average interest rates, which is great news.
The average down payment size for a subprime auto loan has gone down, too, since pre-COVID borrowers were averaging around a $3,250 down payment.
Now that you have an idea of what you can expect a subprime loan to be like, and what other borrowers are qualifying for, you can start the process of car shopping!
Basics of Subprime Car Loans
Subprime lenders work with borrowers who have less than perfect credit. They’re third-party lenders that are signed up with special finance dealerships. To qualify, you need to prove you have the ability, stability, and willingness to pay for a vehicle. This loosely translates to you having a qualifying income, a stable living situation, and a down payment in hand to get your hands on a subprime auto loan.
With poor credit, usually considered a credit score below around 660, most traditional lenders may turn you down for auto financing. Your credit score serves as a snapshot of how well you’ve handled credit in the past, so a poor score can give the impression that you may not be able to pay back the loan very well.
However, there are many reasons why someone may have a less than perfect credit score, and subprime lenders understand that. They look at your credit reports as a whole, and craft a subprime car loan to your personal situation if you qualify.
Common Requirements of a Subprime Auto Loan
Every lender you talk to is likely to have a different list of requirements that you need to meet to get an auto loan approval. However, most tend to require similar things.
Here are some common requirements of a subprime car loan:
- Income – Most subprime lenders require around $1,500 to $2,500 of gross minimum monthly income from a single source.
- Work history – Auto lenders generally require that you’ve held the same job for at least six months to a year.
- Residency – Lenders look for stability in work and residency. Subprime lenders usually require that you’ve lived in the same residence for at least one year.
- Down payment – Most bad credit car lenders require at least $1,000 or 10% of the vehicle’s selling price. Down payment can be cash or trade-in equity.
- Working phone – Subprime lenders require that you have a working contract cell phone or landline phone in your name.
- Personal references – If you meet the other requirements, subprime lenders typically require a list of five to eight personal references with contact information.
- Driver’s license – To test drive or drive a car off the lot, you need to have a valid driver’s license with your current address. This means it can’t be suspended, revoked, or expired.
If you can meet these requirements, you could be well on your way to a subprime auto loan. Keep in mind that everyone’s situation is different, and if you have a unique credit situation (like a past bankruptcy), the lender may require more items.
The First Step to Your Next Car Loan
When you know what to expect, you can walk into a dealer with confidence, prepared, and ready to finance your next vehicle. Finding a dealership with the right resources is the next step in getting a subprime car loan.
Auto Credit Express will look for a dealership in your local area so you can get on the road to better credit. To get matched to a dealer near you that’s signed up with subprime lenders, fill out our free auto loan request form. It’s completely online, secure, and there’s never an obligation to buy anything.