How to Get a Bad Credit Auto Loan

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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 - May 10, 2021

Getting a car loan with bad credit doesn’t have to be a hassle, and it certainly pays to be prepared. We go over lenders that can work with bad credit, and the typical requirements you’re likely to encounter.

Getting a Bad Credit Auto Loan

To get a bad credit car loan, you’ve got to find the right lender for the job. Two of the most common avenues in getting a loan with credit challenges are:

  • Subprime lenders
  • In-house financing

Subprime lenders are signed up with special finance dealerships. Subprime is another word for bad credit. Borrowers with credit scores below 660 are often called subprime borrowers. To get a subprime auto loan, your first step is finding a special finance dealership that works with these lenders. They often assist borrowers with credit challenges such as bad credit caused by life events, bankruptcy, a past vehicle repo, and other unique circumstances.

In-house financing is done by buy here pay here (BHPH) dealerships. They’re also called tote the note dealers, and they only sell used vehicles. This type of lending is unique in that the lender is also your dealer – no need for a third-party lender to approve you. These dealerships are attractive to many borrowers because the credit check is likely to be skipped, allowing for borrowers with the toughest credit scores to secure financing if they meet the other requirements. These independent dealers are plentiful across the states, and many are smaller or family-operated businesses rather than a traditional franchised dealership.

How to Qualify for a Bad Credit Auto Loan

Once you’ve found a dealer that’s willing to work around less than perfect credit, it’s time to prepare for the actual auto loan application. At CarsDirect, we’ve created a nationwide network of special finance dealerships, so we know what many bad credit lenders require to be eligible for a car loan.

The most common requirements are:

  • Down payment – Whether you choose in-house financing or a subprime lender, you’re nearly guaranteed to need a down payment. Most subprime lenders require at least $1,000 or 10% of the vehicle’s selling price. BHPH dealers may require up to 20% of the car’s selling price, but this varies. The down payment requirement can be met with cash or trade-in equity or a mix of both.
  • Proof of income – Proving your income is a vital part of being eligible for vehicle financing, no matter what lender you choose to apply with. Most subprime lenders require you to have a minimum monthly income of around $1,500 to $2,500, before taxes (gross). BHPH dealerships vary in their income requirements, and it’s largely dependent on the car you want to finance.
  • Proof of residency – To qualify for an auto loan, you must prove your residency. Proving your address is usually done by providing a recent utility bill in your name, or a recent bank statement.
  • Proof of a working phone – You must have a working phone in case the lender needs to contact you about your loan. Proven with a recent phone bill in your name, and the phone can’t be a prepaid cell phone.
  • Personal references – Subprime lenders usually require around five to eight personal references. Anyone that doesn’t share your address can be a reference, as long as you have their name, address, and phone number.
  • Valid driver’s license – Must be up to date with your current address. Can’t be revoked, expired, or suspended.

These are basic requirements that you must typically meet in order to get a bad credit auto loan. Depending on your individual situation, you may need more documentation or different documents to be eligible for a bad credit car loan.

Finding a Dealership With Bad Credit Lenders

Once you’ve gathered all your documents together, you can begin the search for a special finance dealership. However, that’s often easier said than done. CarsDirect has compiled a network of dealers that are able to assist with credit challenges, and we want to connect you to one in your local area.

There’s never a cost or obligation to get matched to a special finance dealership with us – so get started right away by filling out our free auto loan request form.


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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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