If you need to finance a vehicle when your credit is less than perfect, you can expect a different process at the dealership. You can prepare for this by knowing what to expect before visiting a dealer.

Why is the Auto Loan Process Different with Bad Credit?

When you have good credit and need a car loan, you find the car you want and then, unless you’ve been pre-approved (always a good idea), you apply for financing at the dealership. You can't follow that path if you have bad credit, mainly because most lenders won't finance a borrower with bad credit.

There are lenders who help people dealing with credit challenges, but they're indirect lenders, meaning consumers can't approach them to get financed. Instead, they have to go to the dealerships they're signed up with to get approved for one of these loans. The reason for this procedure is that subprime lending involves more steps and verification.

Instead of choosing a vehicle, consumers with bad credit need to get approved first. After finding a special finance dealership, you'll meet with the finance manager. They'll interview you to learn about your situation, pull your credit report, and talk about your options.

Then, they'll try to get you approved with one or more of the lenders they're signed up with. If a lender(s) approves your application, they'll send back what's known as a "payment call." This will list the guidelines of the loan, such as the maximum amount financed, maximum monthly payment, and interest rate tier.

From there, the finance manager will identify the vehicles in their inventory that you qualify for. You can check out and test drive them, choose the one you want, and move forward with the paperwork.

Other Differences to Expect

auto loan contractThe process isn't the only difference. When you need a bad credit car loan, you can also expect:

  • Different Requirements – Subprime lenders also have various rules when it comes to qualifying for a loan. Typically, you need to earn a gross monthly income of at least $1,500. There are also rules about your job and employment history and even your residence situation.
  • Additional Documentation – These lenders also require certain documents to verify all the information on your application. These typically include: a pay stub for income verification, a utility bill for residence verification, a phone bill to verify you have a working one, and a list of at least six personal references.
  • Loan and Vehicle Restrictions – There are also rules about the kind of car you can finance. Typically, subprime lenders only allow you to finance cars that are 10 years old or newer and have less than 100,000 miles on the odometer. Also, they usually require the amount financed to be at least $5,000.

Where Auto Credit Express Comes In

An informed car buyer is better prepared for success. Knowing what to expect when you visit a dealership is a good place to start. But how do you find a dealership that can work through your credit quirks? That's where Auto Credit Express comes in.

We connect car buyers to local dealerships that are equipped to handle challenging credit situations. Save the time, hassle, and energy of trying to find a dealer that can help you on your own. Get started by submitting our free and secure car loan request form today.