Does Loan Amount Matter in Bad Credit Financing?

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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.


, - March 31, 2021

Yes, your loan amount can make a difference in bad credit car loans! When you're financing a vehicle with poor credit, you're subject to lender approval at every turn. Most lenders that deal with bad credit car loans have specific stipulations for lending, including the amount of the loans they give.

Loan Amounts for Auto Financing

While it may not surprise you that borrowers with better credit can be approved for larger loans, you may be shocked to know that they can also be approved for smaller loans than credit-challenged consumers, too. Just like you have to qualify for a loan, the loan itself has to fall into the lender's acceptable range in order for them to approve you for financing.

All lenders generally go about things in the same way, and each lender has a set of qualifications that make them unique – one of these being loan amount. Typically, lenders don't make loans of under $5,000. This is especially true for subprime auto loans or bad credit car loans. Maximum loan amounts can vary greatly depending on the lender you're working with and your credit score.

Lenders aren't one size fits all, and this is what allows you to be approved for financing with one lender, but denied at another when nothing about your application is different. It stands to reason that most lenders have a maximum loan amount that they can offer, but why is there a minimum?

Lenders have minimum loan amounts in place because it isn't profitable to make smaller, shorter loans. Car loans under $5,000 just don't make financial sense for the lender, and may not make sense for you either.

Financing Less Can Cost More

We often get consumers asking us why it is that a smaller loan isn't possible. This can be a tough question to answer because much of the time the amount of loan that’s right for you depends on your individual situation. Not being able to get a low-cost auto loan can be frustrating to many bad credit borrowers.

Much like making a down payment, though, borrowing more once can make more financial sense than having to borrow a little every few years.

For example: If you only want to finance a vehicle that costs $3,500, after taxes, fees, and dealer cost, you may actually end up paying more for the less expensive vehicle than it's worth – especially with a higher interest rate due to bad credit. However, if you set your sights on a slightly more expensive vehicle that's in better condition, you may not risk having to get a vehicle loan again as quickly as you might with a cheaper car.

If you’re always opting for the less expensive, older vehicles for the sake of a low loan amount, it may cost you more in maintenance and repairs, too. Older cars come with an inherent risk of mechanical issues due to age, wear and tear, and possibly higher mileage – so the costly repairs could eventually outweigh the low loan amount.

Getting a Reliable Vehicle for Less

As a bad credit borrower, it's important to look for an affordable, reliable vehicle that you don't have to constantly sink money into rather than getting a cheap car that isn't going to last. Thanks to new technology, many cars are lasting longer these days which means you could have a better chance at financing cars that are still in good condition, even with questionable credit.

It may surprise you to know that even as a credit-challenged consumer, even new vehicle financing may not be out of your reach. But, if it is there are plenty of quality used cars and certified pre-owned (CPO) vehicles to choose from.

In fact, a CPO can be a wonderful option for people with poor credit. These vehicles cost a little more than a standard used car but come refurbished and with a manufacturer-backed warranty that could save you money down the line.

Bad Credit Car Loans

Bad credit car loans come from subprime lenders. These lenders look beyond credit to help finance people in many unique situations. When you're working with a subprime lender, your minimum auto loan amount is still $5,000 but the vehicle you're financing doesn't have to cost that much. You can usually finance a lower-cost car if the total amount of financing after taxes and fees is over $5,000.

When it comes to bad credit car loans and working with a subprime lender, there are a few stipulations besides loan amount if you want to be approved for auto financing:

  • Vehicles typically must be under 100,000 miles
  • Lenders generally don't finance a vehicle over ten years old
  • You're required to have a valid driver's license
  • You must be at least 18 years old to get an auto loan in your name
  • You're required to show proof of income, residency, and employment
  • You must have a working landline or contract cell phone in your name
  • Personal references are usually required
  • Subprime lenders that work with bad credit require a down payment

Specifics vary by lender, of course, and not all lenders can be found around every bend. Sometimes it can be a hassle to try and figure out where to find a lender that can help if you have bad credit, but it doesn't have to be if you work with us.

Let Us Point the Way

Here at CarsDirect, we have a nationwide network of special finance dealerships that have been working with credit-challenged consumers for over two decades. We want to match you to a dealer in your local area that has the subprime lending resources you need. Just fill out our fast, free, zero-obligation car loan request form and get started toward your next vehicle 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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