Do You Need a Subprime Car Loan?

Get Car Financing
Even with poor credit.

By

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 6, 2020

Many people assume that when they have bad credit they have to buy some clunker off a private seller or get an old, high-mileage vehicle from a buy here pay here lot, but that's not always the case. In fact, if you have bad credit, there may be more opportunities out there than you think. You just have to find the right dealership, subprime lender, and deal for your needs.

Determining Your Vehicle Needs

When you're struggling with your credit and you need an auto loan, you have to ask yourself some basic questions to get the ball rolling. Consider these four questions:

  1. What does my credit situation look like?
  2. What are my driving needs?
  3. What's my car buying budget?
  4. Why do I need a new vehicle?

All these questions go hand in hand when finding the right kind of auto loan for your situation. If you can't answer them, it's time to do your homework before you jump into car buying.

How you answer the questions can help you determine the kind of vehicle and loan you should be looking for. It's important to get something that fits comfortably into your budget and has the features and attributes you need.

Let's take a look at why these questions are important, and how your answers can help lead you to the right solution for your situation.

Knowing Your Credit

Knowing your credit score and what's on your credit reports is essential to getting the right auto loan. If you don't know these things, you let someone else dictate what your situation looks like, and you may not be aware that you have other options, or if you're being offered an unreasonable interest rate.

Your credit situation also lets you know whether or not you're looking for a loan from those lenders that can help. Not all lenders are the same, and some don’t work with people that are struggling through credit issues. Subprime lenders are the most common solution for people with poor credit because they look at other factors in addition to a credit score to consider you for a car loan.

Why You Drive

To help you see your vehicle needs, something as simple as making a list of priorities can help. First, write down why you drive. Do you take the kids to school, commute to work, or run errands that keep you on the go every day? Maybe you only drive when you have to leave town, or occasionally take a trek to the grocery store. Writing down why you drive can help you map out the type of car you're looking for.

Now, we suggest making a three-part list: what you need, what you don't want, and what you wish you could have in a vehicle. Once you have all these laid out, it's important to you prioritize your needs and don't wants. Your wishes would be nice to have but aren't a necessity. If a car that meets your needs includes some of your wishes, consider it a bonus.

When you're shopping for a vehicle, keep in mind what you need. For example, if you're the only one that uses your car on a regular basis, and it's typically for a long commute to work, a seven-seater SUV isn't something you probably need, and a more fuel-efficient, smaller model vehicle is probably a better match to your driving needs.

Use the resources you have available to research cars, like our new and used car sections, and find the direction you want to go in when you're shopping for a vehicle.

How Much Can You Afford to Spend?

Lenders don't want you to go broke paying for an auto loan. For this reason, they require all applicants to meet a minimum income amount. Specific amounts vary by lender, but typically, subprime lenders require you make at least $1,500 to $2,000 a month before taxes.

They also go through a process of finding out how much available income you have. This process is called "debting you out" and it involves calculating your debt to income (DTI) ratio.

You can do this yourself to see how much you could comfortably spend on a car loan. Find your DTI ratio by dividing the total amount of your monthly bills, including an estimated vehicle and insurance payment, by your pre-tax income. Subprime lenders usually won't accept a DTI ratio that's higher than 45% to 50%.

Do You Truly Need a Car Now?

As a credit-challenged consumer, this is a very important question to ask yourself. Do I really need a car right now? If major mechanical issues or a lot of body damage is making your vehicle unsafe to drive, it might be time to look for another one.

However, if your car is still in good condition, especially if it’s paid off, you might want to consider holding off on getting another vehicle right away. Doing this could give you the chance to work on improving your credit to get better rates and terms on a loan when you do decide it's time for that next car.

Subprime Loans Do Double Duty

If the time is now and you need that next vehicle but can't wait to improve your credit, a subprime loan might be just what you're looking for. Subprime loans are offered from lenders that work with special financing dealerships to help people with poor credit get a loan that other lenders can't approve them for. You can get into a new or used car that’s both affordable and reliable and improve your credit score at the same time.

Here at CarsDirect, we want to get you going in the right direction to get the vehicle that meets your needs. We’re teamed up with a large network of dealers throughout the country that work with credit-challenged consumers. Get started by filling out our free auto loan request form. Save yourself the time, hassle, and stress of looking for a car loan on your own!

Free Credit Score

Get your free credit score now! Get a copy of your most recent credit score.

Get Your Free Score

Auto Insurance

Get competitive quotes on insurance in your area.

Vehicle Warranty

Protect your vehicle and you could save thousands on auto repairs.

Get a Free Quote

Need a Car Loan?

It only takes a minute.

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.


Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.

Privacy Policy|Do Not Sell My Personal Information|Terms of Use|Cookie Policy|Disclaimer|
COPYRIGHT 1999-2020 MH Sub I, LLC dba CarsDirect.com