Auto Loan Providers for First-Time Car Buyers

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - December 31, 2020

New borrowers tend to have lower than average credit scores, making it hard to qualify for a car loan with traditional lenders. Luckily, there are auto loan providers that assist first-time car buyers and borrowers in other bad credit situations.

First-Time Borrowers and Car Loans

A lack of credit history typically generates a lower credit score. One of the biggest influencers of your credit score is payment history – but if you don’t have any reported payments, it can lead to a poor credit score.

Many first-time car buyers are asked to bring a cosigner to their first auto loan because they can’t meet the credit requirements alone. But not everyone can ask someone to cosign for them. For those that need to go it alone, subprime lenders can help.

Bad Credit Auto Loan Providers

Subprime is lender-speak for “bad credit.” The five main categories are super prime, prime, non-prime, subprime, and deep subprime. If your credit score is below 600, you’re generally considered a bad credit or subprime borrower. First-time car buyers often fall under this category.

A subprime borrower can run into difficulty meeting a traditional lender’s requirements for an auto loan. However, subprime lenders are equipped to assist first-time car buyers and people in other bad credit situations. They're third-party lenders that are signed up with special finance dealerships, and they use more than just credit score to determine eligibility.

Applying for a subprime auto loan means bringing proofs and documents to the dealer, where you talk financing with the special finance manager, who acts as the go-between for you and the lender. If you meet all the requirements for a subprime car loan, you’re told the maximum monthly payment you qualify for. From there, you pick a vehicle from the dealership’s stock and take delivery!

One of the biggest benefits of financing your first auto loan with a subprime lender is the opportunity for credit building. Subprime lenders report their loan to the credit bureaus, so your car payments can build a payment history that raises your credit score.

Ability, Stability, Willingness

A lender's biggest concern, regardless of the type of credit you’re applying for, is your overall stability and ability to repay the loan. The more stable you are, the better the chances you can complete the loan successfully and make your payments on time.

To get a better idea of your overall financial health and situations, subprime lenders ask for a variety of documents that show you’re ready for an auto loan. Here are some common stipulations of subprime car loans:

1. Income and Work History

Most subprime lenders require that you have a minimum gross monthly income of around $1,500 to $2,500, and many require that it’s from a single source. Some lenders allow more than one job to meet this requirement, but it can depend on your situation, time on the job(s), and the lender’s stipulations.

To qualify in terms of work history, you need to have had your current job for around one year, and sometimes also a stable employment history for the last three years without gaps in work. Gaps are usually defined as not having a job for longer than 30 days. If your current job is your first job ever, subprime lenders are likely to require you’ve been there for at least one year.

2. Address and Contact Info

Subprime lenders usually require that you’ve lived at the same permanent address for around one year. To prove your residency, bring a recent utility bill or bank statement in your name with your current address.

You also need a landline or contract cell phone so the lender can contact you. Bring a recent phone bill that’s in your name. A prepaid cell phone doesn't meet this requirement.

To drive the vehicle off the lot and register it in your name, you need a valid driver’s license. It’s also used to verify your identity. The license must be up to date and list your current address, and it can’t be revoked or suspended.

3. Down Payment and Other Items

With a lower credit score, expect to need a down payment to qualify for an auto loan. Subprime lenders generally require at least $1,000 or 10% of the car’s selling price, sometimes whichever is less. You can use cash, trade-in equity, or a combination. Your income and the vehicle you want largely determines the exact amount you need to put down.

Subprime lenders also require a list of around five to eight personal references and their contact information. The only stipulation with references is they can’t be someone that shares your home address – anyone else is fair game.

Where Are No Credit Car Loan Providers?

Preparing your documents for an auto loan is one of the biggest hurdles. Once you know what to gather, it’s much easier to go to a dealership with confidence that you’re ready for a car loan. Your personal situation may require the need for more items, but the requirements we listed above are common items that you’re most likely to need.

Finding a dealer that’s signed up with lenders that can assist first-time car buyers, though, is another step that you need to conquer. But just as we know what subprime lenders require, we know where to find special finance dealerships.

Here at CarsDirect, we’ve created a network of dealers that covers the whole country. To get matched to a dealership that’s signed up with bad credit loan providers after you fill out our auto loan request form. It’s free, secure, and carries no obligation, so get started right now!


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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