What Can I Expect With Subprime Financing?

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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 7, 2020

Subprime auto loans are offered by subprime lenders for borrowers with bad credit, limited credit histories, or other credit issues. Borrowers who’ve gone through bankruptcy or had a repossession can also look to subprime lenders for a car loan.

Subprime Auto Financing and Dealerships

Subprime auto loans are done by subprime lenders. Subprime means “bad credit,” and the name comes from the credit score scoring ranges. If your credit score is around 600 or lower, you’re generally considered a subprime borrower.

People who fall into the subprime range may not have a long credit history, or they’ve had some habitual or situational poor credit situations. However, subprime financing looks at more factors besides just your credit score to craft a loan that fits your situation.

To get the financing process up and running, you need to find a special finance dealership that’s signed up with these lenders. Subprime lenders are third-party, and not every dealer has these resources. The ones that do are called special finance dealerships.

If you apply for a subprime car loan and meet the requirements, you choose a vehicle that fits within the lender’s limits, namely your maximum monthly payment. Some subprime lenders don’t approve auto loans for cars that are over 10 years old, or have other rules relating to the age, mileage, or overall condition of the vehicle.

When it comes to the actual terms of the loan, like other loans, it’s largely determined by your personal situation and what you qualify for – but we have some averages to peek at.

Average Subprime Car Loan Terms

To help you prepare for what terms you may come face-to-face with, we’ve got some data.

We’re not lenders here at CarsDirect, but we have a network of dealers that work with bad credit borrowers. After surveying a group of them, we’ve gathered the average loan terms borrowers are seeing:

  • Average down payment: $2,066
  • Average interest rate: 13.16%
  • Average amount financed: $23,842

Of course, these figures are just averages, but an average is a good place to start! Remember that your income and your individual credit situation determines what your loan terms are going to be. Additionally, your down payment size can also influence a lot too.

Requirements of Subprime Auto Loans

While your unique financial situation makes up your loan terms and what you qualify for, there are some baseline requirements that subprime lenders have.

Here are the basic requirements to prepare for:

  • Income – Have a minimum monthly income of around $1,500 to $2,500 before taxes.
  • Down payment – Subprime lenders typically require a down payment of at least $1,000 or 10% of the car’s selling price, occasionally whichever is less.
  • Working phone – You must have a working landline or contract cell phone to qualify for subprime financing.
  • Proof of residence – Your address has to be verified, so expect to bring either a recent utility bill with your current address or a recent bank statement.
  • Valid driver’s license – To test drive and eventually drive a vehicle off the dealership’s lot, you need a valid driver’s license with your current address. This is also used to verify your identity, and it can’t be revoked, expired, or suspended.
  • Personal references – A list of references isn’t necessarily a requirement to qualify, but a subprime lender usually requires around five to eight personal references with complete contact info.

Sometimes, gathering your documents is the most tedious part of getting an auto loan. It’s much easier to get your items together if you have an idea of what a lender is going to require. Another hassle is finding a dealer with subprime lending resources, and we can help with that too!

Finding a Subprime Car Loan

At CarsDirect, we know a thing or two about subprime auto loans. We’ve created a nationwide network of dealerships over the last 20 years, and we assist bad credit borrowers in finding local dealers that are signed up with them.

To get on the road to subprime financing, start right here with our free car loan request form. We’ll look for a dealership near you and get you connected to them with zero obligation.


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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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