Can I Work with a Direct Lender for a Bad Credit Auto 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.


, - November 26, 2019

There are several types of lenders you can work with even if you have bad credit, including direct lenders. The trick is to be prepared and understand that it could be more difficult to get approved for a loan from a direct lender than from other lenders that work with bad credit borrowers.

Getting a Direct Loan

Before you apply for a direct loan, it’s important to be aware of your credit situation. You should know your credit score and get copies of your credit reports, which you can do for free by visiting www.annualcreditreport.com.

When you know where your credit stands, you keep the ball in your court by not allowing lenders to determine how good or bad your credit is.

It can be tough to qualify for a direct loan with problem credit, but if you’re able to, it’s usually worth it. Direct loans can make your trip to the dealer for a car go more smoothly. Because you’re pre-qualified and know how much you’re approved for, you’re able to simply pick out a vehicle, negotiate a price, and get your car.

Direct loans are typically offered by banks, credit unions, and independent lenders. These lenders provide financing directly to you. Generally, the better your credit score, the easier it is to obtain a direct loan, as this type of lender usually bases loan approvals on your credit score.

When you’re looking for a direct loan, it’s a good idea to start with your bank or credit union. It may be easier to get a bad credit auto loan from a direct lender that you have a history with, especially if you’re a member in good standing.

If you’re unable to qualify for a loan from your financial institution, you can try with an independent lending company. Today, many of these lenders handle business entirely online, so you may be able to get a car loan from the comfort of your own home.

A word to the wise: getting an auto loan with bad credit from a direct lender does come with some drawbacks – the biggest of which can be a high interest rate.

Other Options for Bad Credit Borrowers

If getting a bad credit car loan through a direct lender is proving to be too difficult, there are other options for borrowers with less than perfect credit. These options typically come in the form of indirect lenders or in-house financing dealerships.

1) Indirect lenders – These can be traditional lenders, captive lenders, or subprime lenders, but no matter which type you work with, all of them work through dealerships, and you work with the dealer’s finance manager instead of directly with the lender.

Of these options, traditional lenders are more inclined to only approve borrowers with good credit, while subprime lenders typically work with bad credit borrowers. Captive lenders that are the subsidiaries of automakers have been known to work with both good and bad credit borrowers, depending on the brand and other factors.

2) In-house financing dealers – Better known as buy here pay here (BHPH) or tote the note dealerships, in-house financing dealers are also lenders.

These dealerships are typically a last resort because they have gained a reputation for having high prices, old vehicles, and being quick to repossess. These stereotypes don’t hold true in today’s automotive market, and many BHPH dealers can be a good option for borrowers with little to no credit. They only sell used cars, but the age or the selection you’re likely to find depends on the lot you visit.

It’s worth noting that the interest rate with in-house lenders tends to be the highest you’re going to find with bad credit. You’re also typically asked to provide a down payment.

CarsDirect Is Here to Help

Though it’s possible to work with a direct lender for a bad credit auto loan, you may have more luck getting a loan from a subprime lender that’s prepared to help you if you’re struggling with credit issues. These lenders look beyond your credit to help get you approved.

If you’re looking for a place to go for your next car loan, start here at CarsDirect. We work with a nationwide network of special finance dealerships that have the lenders you need. To get the process of getting matched to a local dealer started, fill out our fast and free auto loan request form right now.

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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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