Bad Credit Indirect Auto Lending Process

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Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


, Contributing Writer - August 20, 2020

The bad credit auto lending process is slightly different from the traditional direct car loan process. But not to worry, we’re here to help walk you through it so you can walk into your next auto loan with confidence.

Indirect Bad Credit Lenders

Indirect lenders are third-party lenders that you never actually meet, and their loans are aptly named indirect auto loans. Direct loans, on the other hand, come from lenders at banks or credit unions, where you meet and apply with the lender directly.

When you apply with an indirect lender, you work with the finance manager at the dealership, who acts as the middleman between you and the lender. When it comes to bad credit car loans, they’re called subprime lenders.

For borrowers with less than stellar credit, going for a subprime auto loan is a good step to repairing your credit for better opportunities later. However, the process may be somewhat different than what you may be used to.

To start the bad credit indirect lending process, you have to find a location that has bad credit lending resources, or a special finance dealer.

Applying for an Indirect Subprime Auto Loan

The process of getting into your next vehicle may feel somewhat backward if you pursue a subprime car loan. This is because most borrowers find a vehicle first then look for the right lender – not with subprime auto loans.

First, a subprime lender needs to see how much car you can actually afford before you get your hands on an approval. You’re going to need to meet some requirements and submit proof that you’re able to take on an auto loan, and then you’re told what monthly payment you qualify for. From there, you work with a dealership and find a vehicle that meets your needs.

To help you prepare, here are the common subprime financing requirements you can expect:

  • Income – Must make around $1,500 to $2,500 a month before taxes are taken out. Prove your income with a recent computer-generated check stub.
  • Down payment – Must have a down payment of at least $1,000 or 10% of the car’s selling price. Trade-ins can help meet this requirement, too.
  • Residency – Must have lived in the same area for at least one year and be able to prove your address with a recent utility bill or bank statement in your name.
  • Work history – Must have a three-year-long work history, and been at your current job for around six months to one year (varies by lender).
  • Working phone – Must have a working cell phone or landline phone, proven with a recent phone bill in your name.
  • Personal references – If you qualify, expect to provide a list of around five to eight personal references with their names, addresses, phone numbers, etc. Can be anyone except people that you live with.
  • Driver’s license – Must hold a valid driver’s license that’s not revoked, expired, or suspended, and it has your current address.

Benefits to Indirect Auto Loans

Besides having the second chance at auto financing, there are other reasons to work with an indirect bad credit lender.

The biggest advantage of going through a lender through a special financing dealership is that their loans are reported to the credit bureaus. This means that your on-time payments can help heal or build your credit score! Payment history is the most important aspect of your credit score, so when you make your payments on time, you’re doing one of the best things you can to repair your credit.

With a better credit score, you up your chances of getting approved for better rates, and qualifying for great deals offered by automakers. Additionally, other types of credit can be easier to obtain, as well.

Special finance dealers can often send your information to multiple lenders that they’re signed up with. This not only increases your chances of finding a lender for your situation, it also lets you see what kinds of rates you can qualify for – without having to drive all over town.

You may think, “Won’t there be multiple hard pulls on my credit report?” A valid concern, but rate shopping doesn’t work that way. When you apply for the same type of credit within 14 days, only one hard inquiry impacts your credit score. Great, right?

Now that you’re armed with knowledge and hopefully more confidence on what type of credit, you can start looking for dealerships.

Drive Toward Better Credit

Indirect subprime lenders aren’t the easiest to find, but don’t worry, we’ve already found them. Here at CarsDirect, we have created a nationwide network of dealers that are signed up with subprime lenders.

To get matched to a dealership in your local area that has the lending resources you need, fill out our free auto loan request form right now!

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, Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


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