Surprising Stipulations For Getting a Bad Credit Car Loan

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Even with poor credit.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - February 10, 2021

Bad credit car loans come with some requirements and stipulations that have to be met. Most bad credit auto lenders have the same basics, though a specific lender may ask for more or less than others. Some stips may not make or break your ability to get an auto loan in every situation but it’s important to be aware of them when your credit isn’t stellar.

Lesser-Known Auto Loan Stipulations

There are many basic requirements of getting an auto loan with bad credit, though not all lenders carry the same ones. Most agree on the basic principles that you have to have the ability, stability, and willingness to repay a car loan in order to qualify for one.

Requirements such as proof of income, employment and residence stability, and the ability to make a down payment are typically universal, but there are some stipulations that not every lender asks for upfront.

Here are five of the lesser know stipulations for getting the bad credit car loan you need:

  1. Proof of a working telephone in your name – A common saying among lenders and dealers used to be "no phone no loan." This may sound harsh, but its purpose is to ensure that a lender can get in touch with you during your loan. Landline or contract cell phone service in your name is typically required. Prepaid phone plans aren't accepted.
  2. Personal references – It's standard for bad credit lenders to require you to provide five to eight personal references, complete with names, addresses, phone numbers, and email. References can be friends, family, or co-workers, as long as they don't live with you.
  3. Proof of residency – Lenders typically ask for a utility bill or bank statement in your name for the address listed on your application to prove your residency.
  4. A valid driver's license or State ID – In order to legally drive your vehicle, and prove your identity, you need a valid driver's license that's not revoked, expired, or suspended. However, in some cases, lenders may only require a valid state ID to prove your identity.
  5. Proof of insurance – Whenever you take on an auto loan, no matter if the vehicle is new or used, you're required to carry full coverage auto insurance on a financed vehicle. Since the car isn't technically yours until you finish paying it off, the lender requires you to keep the vehicle as protected as possible and may require higher levels of insurance than you would choose if you weren't financing.

Basic Bad Credit Car Loan Requirements

In order to qualify for a bad credit car loan, you need to meet the basic requirements that let the lender know that you can repay the loan. This typically means having a reasonably stable residential situation, and that you're willing to have some skin in the game.

These basic requirements need to be met for most credit-challenged consumers to be able to qualify for an auto loan:

  • Proof of income – As a bad credit borrower, most subprime lenders require that you make at least $1,500 to $2,500 a month before taxes, preferably from a single source of W-2 employment.
  • Down payment A down payment is a must when you have a low credit score. Subprime lenders usually ask for at least $1,000 down or 10% of the vehicle's selling price, whichever is less.

The specific amounts that are required even on these most basic stipulations can vary. If you're concerned with any requirements you may encounter, don't hesitate to contact a dealership to see what you can expect from the lenders they work with.

Looking at the Big Picture

The stipulations and requirements for getting a bad credit car loan vary by lender, and they also differ from a traditional auto loan. When you have a credit score that's around 660 or above, it can be easy to go to a dealership, pick out a vehicle, get financing, and then take delivery of your car.

When you have poor credit the process is almost reversed in that you have to qualify for financing first. With a lower credit score, you're most likely going to need to work with a subprime lender through a special finance dealership. These dealers have the resources you need to get into a car loan with less than perfect credit, but you need to know that there are some conditions to expect.

Firstly, you should know that it may be more difficult to qualify for financing on a brand new vehicle. It's not impossible, but the cost of most new cars makes it harder to qualify for a one with credit issues. As a bad credit borrower, it also pays to get the most affordable vehicle you can for the shortest loan term possible. This means paying attention to the overall cost of your car loan, not just your monthly payment.

When you focus solely on monthly payment it's called being a payment shopper, and it could mean paying more for your vehicle than it's worth. Borrowers with bad credit tend to qualify for loans with a higher interest rate – the higher your interest rate and the longer your loan term, the more interest charges you pay. For these reasons, it's a good idea to prepare yourself for an auto loan by knowing where your credit stands and making a car buying budget ahead of time.

Ready to Find Your Next Auto Loan?

When you're ready to take the next step and start looking for the dealership to go to for your next car loan we want to help. CarsDirect has been connecting credit-challenged consumers to bad credit auto dealerships for over 20 years, and we want to do the same for you. You could drive from dealership to dealership applying for auto loans, or you could fill out our fast, free, no-obligation car loan request form whenever it's convenient for you. Then, we'll get right to work finding a local dealer for you!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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