Increasing Your Approval Chances for a Bad Credit Car Loan

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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 10, 2020

When you're facing the possibility of getting a car loan with bad credit, you may worry that your approval odds are slim. However, in many cases, there's no need to worry! There are many lenders available that may be able to help you get the loan you're looking for. You can use these tips to increase your chance for a bad credit auto loan approval.

Getting a Bad Credit Car Loan

The secret to getting a bad credit car loan is preparation. When you're struggling with credit issues, you most likely need a subprime auto loan from a lender at a special finance dealership. These lenders are ready to work with people who have less than perfect credit, but they require you to meet several qualifications in order to be considered for a loan approval.

These requirements are actually a bigger help to you than the lender. Lenders don't want you to go broke paying for the vehicle you need, and they know that you're more than just a credit score. Being prepared to meet their stipulations for financing can make the process go more smoothly, and by making sure you're ready ahead of time, you improve your approval odds.

Let's take a look at what subprime lenders usually require, and how you can prepare for this:

  • Proof of identification – Lenders typically require a valid driver's license or state I.D. as proof. This shows them that you are who you say you are.
  • Proof of income – Most subprime lenders require that you make at least $1,500 to $2,000 a month before taxes to qualify. You need to provide your most recent computer-generated check stub, showing year-to-date income. Some lenders require more than one check stub, so have a few on hand.
  • Proof of employment – Your check stub also serves this purpose. Lenders generally require that you've been at your current employer for at least six months to one year, with a three-year minimum work history and no gaps longer than 30 days between jobs.
  • Proof of residence – Bring a utility bill or bank statement in your name to the dealership with you. It must be for the same address you used on the car loan application.
  • Proof of a working phone – Lenders must be able to contact you if necessary. Bring a current bill, in your name, for a landline or contract cell phone. Prepaid phones won't cut it.
  • Personal references – Lenders usually require a list of five to eight personal references, complete with names, addresses, phone numbers, and email addresses. You can use family, friends, and coworkers, but none can share your address.
  • A down payment – Subprime lenders require a down payment. Typically, the minimum amount is at least $1,000 or 10% of the vehicle's selling price. This shows them you're willing to invest in your own success.

Having all your documentation and the down payment with you on your first dealership visit can really speed up the approval process. However, this isn't always enough. In some cases, bad credit borrowers need additional help in order to qualify for lending.

5 Tips to Increase Your Approval Odds

In order to improve your chances of a loan approval, there are a few key things you can work on that can help your case. These support your situation, and some can even give a lender more reasons to approve you if they're on the fence.

Here are five things to help your chances of getting a bad credit auto loan:

  1. Know your credit – Get your credit score and your credit reports. When you know what the lender is seeing, you know what to expect going in. When you skip this step, you run the risk of thinking your credit and chances of approval are something other than what they are. The information in your credit reports affects your credit score; the more negative information, the lower your score is likely to be. Additionally, when you know what your credit reports look like, you give yourself a better understanding of the best way to improve your credit.
  2. Know your budget – This is a big one. Not only do lenders require a minimum income, they also require that a certain percentage of it is available. This is known as your debt to income (DTI) ratio, and it compares your current bills to your pre-tax income to show a lender what your budget looks like. Generally, lenders require a DTI ratio of no more than 45% to 50%. Calculating your DTI is simple, and you can learn how here.
  3. Get a cosigner – If your credit's too low, or practically nonexistent, a lender may require a cosigner. Even if one isn't needed, a cosigner with good credit can increase your approval odds and possibly help you qualify for better rates and terms. This is a big responsibility, so be sure you know what you're asking, and that the person who's cosigning fully understands what's involved if they accept.
  4. Add a co-borrower – Maybe your credit isn't the issue, but instead, your income isn't quite up to par. In this case, adding a co-borrower can help you qualify because lenders consider both of your incomes together if they’re your spouse. A co-borrower is also known as a joint applicant, so you both own the vehicle if you go this route. Like a cosigner, if adding one isn't necessary, it could still make approval easier.
  5. Make a large down payment – If you're looking for an easier time with an approval, or maybe for a better deal, making a large down payment could be just the thing. When you put down money up front, it decreases the amount you're borrowing, which helps in many ways. These may include a lower monthly payment and overall cost, a better interest rate, an easier time getting approved, or the possibility of taking out a shorter loan term, to name a few.

Now that you have a few tricks up your sleeve on how to increase your approval chances, you need to make sure you're using the right lender for your credit situation. Not all lenders work with poor credit borrowers, and not all dealerships work with lenders that do.

We Can Guide You to the Right Dealership

Luckily, you have us on your side. At CarsDirect, we work with a nationwide network of special finance dealers that have the subprime lending resources available to help people with less than perfect credit.

If you're not sure where to start your next car buying journey, let us guide the way. Fill out our fast, free, and easy auto loan request form, and we'll get to work matching you with a local dealership.

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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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