Is There a Minimum Amount for Auto 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.


, - September 11, 2018

Auto loans come in many different sizes, but the minimum or maximum amount of car that can be financed ultimately depends on the borrower’s credit score, available income, and the lender they’re working with.

Defining “Small” Auto Loans

When it comes to financing a vehicle, many people – especially those who struggle with credit issues – often inquire about getting a small auto loan. Borrowers looking for just a few thousand dollars to spend on a car that can get them through a rough patch may think this is the best bet. But if your credit is suffering, this may cause more strain on your wallet in the long run.

Believe it or not, auto lenders want you to purchase a reliable vehicle. There’s typically a minimum financing amount of $5,000 on subprime loans. Often, if you’re looking for less than $5,000 and you have poor credit, a loan is difficult to come by. There may be other options you can look into, however, but first, let’s look at the typical vehicle financing requirements you’re likely to come across.

Financing a Vehicle with Poor Credit

There are lenders available that have the ability to look beyond credit scores and finance people in a number of credit situations, both good and bad. If your credit is in the middle – not quite good, but not poor enough to be considered “bad credit” – you typically fall into the nonprime credit range.

According to Experian, nonprime includes anyone whose credit score falls between 601 and 660. There are two categories below this: subprime (501 to 600) and deep subprime (300 to 500). Anyone falling into these lower three categories is likely to need a special finance dealer that works with subprime lenders for any hope of financing a vehicle.

When you visit a special finance dealership, lenders have requirements that need to be met before financing can be approved.

Typical Borrower Requirements:

  • A valid driver’s license
  • Proof of income with a recent computer-generated check stub showing year-to-date income from a single source that shows at least $1,500 to $2,000 a month before taxes
  • Proof of a working landline or contract cell phone name in the borrower’s name
  • Six to eight references complete with names, addresses, and phone numbers
  • A down payment of at least $1,000 or 10 percent of the car's selling price, whichever is less

Eligible Vehicle Requirements:

  • Minimum loan amount of $5,000
  • Vehicles must be no more than 10 years old
  • Cars must have less than 100,000 miles
  • Vehicles must have a clean, non-branded title
  • Only passenger cars can be financed

Auto loan requirements vary by lender and the borrower’s credit situation, but being prepared for the vehicle requirements and the paperwork makes for a smooth visit to the dealership.

Alternate Options for Small Auto Loans

If you truly only need a small auto loan, your best bet is a buy here pay here (BHPH) dealer. These dealerships finance in house and don’t go through outside lenders to secure a loan. They’re more likely to have older, higher mileage, and lower priced vehicles that they’re willing to finance.

However, this type of vehicle may not be the most reliable, and a loan from a BHPH dealer typically won’t help improve your credit like a subprime auto loan, since many don’t report positive payment information to credit bureaus. Plus, you’ll still need a down payment, and you may have to make your payments in person – usually on a weekly or bi-weekly schedule.

Let us Lead the Way to Your Next Car Loan

Here at CarsDirect, we understand what it’s like to need a vehicle, and how difficult it can be to get financed if you’re struggling with credit issues. Even though financing anything for cheap sounds like a good solution when you need a car as soon as possible, you could be doing yourself a disservice.

Instead, let us point you toward one of the special finance dealerships we work with. These dealers have the leading resources to help people in all kinds of situations get the reliable vehicles they desire – either new or used! An auto loan may be more affordable than you know. Find out by filling out our online auto loan request form today!

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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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