You might not know where to find auto financing if you're dealing with less than perfect credit. Should you try to get a bad credit car loan with a bank or credit union, or is there another option?

Is a Bank or Credit Union Better for a Bad Credit Car Loan?

bank officeCredit unions and banks are different in many respects, but both are direct lenders that you can visit to apply for an auto loan. You can get pre-approved before even heading to a dealership, then shop for a vehicle based on the terms you're given.

Here are a few of the noticeable differences between banks and credit unions:

  • Banks are generally larger lending institutions that are publicly owned and for-profit establishments. While this often gives them the ability to offer more services and competitively price loans, borrowers are often subject to stricter approval conditions and more fees.
  • Credit unions are usually smaller lending institutions that put their focus on the member experience because they're non-profits and member-owned. This typically allows them to offer less strict approval standards and lower interest rates on loans and credit cards. However, you often need to become a member if you aren't already before applying for a car loan (which may involve opening a savings account) and live in the area the credit union serves.

If you need a bad credit car loan, it may not matter whether you apply with a bank or credit union. Both places are direct lenders that traditionally require applicants to have good credit in order to get approved. You should still discuss your chances for a car loan with them, especially if you have an established relationship with one.

In the end, poor credit may stop you from getting an auto loan with a credit union or bank due to their stricter credit demands. If that's the case, you're going to need to find an alternative source for financing.

Special Finance Car Dealerships Could Be Your Best Bet

There are other lenders that are more willing to finance borrowers with bad credit. Subprime lenders are typically indirect lenders that rely on factors beyond credit to approve applicants, such as income, employment history, and residence stability.

While you usually can't approach a subprime lender directly and apply for a loan, they lend through certain car dealerships. So, the key to getting financed with a subprime lender is applying with a dealership that works with them.

Finding a Bad Credit Car Loan

If you need a bad credit auto loan, we recommend that you check with your local bank or credit union if you're a member in good standing. Otherwise, finding a special finance dealership with subprime lending connections could be your best bet.

Auto Credit Express can help you find a special finance dealership if you're in search of a bad credit car loan. We work with dealerships across the country that are teamed up with subprime lenders. We can match you with a dealer in your area if you start the process by submitting our free and secure auto loan request form online.