What Are 2nd Chance Auto Loans?

Get Car Financing
Even with poor credit.

By

Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


, Contributing Writer - February 9, 2017

Consumers typically have bad credit as a result of the mismanagement of previous credit agreements. Although bad credit can come about for a variety of reasons, and it isn't necessarily indicative of a person's character, it does make getting approved for future credit harder.

Of course, people with problem credit still need a way to get around. But the problem, for people who need to finance a car, is that getting approved for an auto loan can be more challenging with bad credit. This is because most banks, credit unions and other major lenders tend to only deal with consumers who have good credit.

This leaves a significant number of people with less than perfect credit out in the cold. To cover this gap in lending, certain dealerships and lenders offer second chance auto loans.

Second chance auto loans are exactly what they sound like: car loans for people with bad credit, thin credit, no credit or other credit issues, who traditional lenders don't want to lend to. They are also referred to as bad credit auto loans and subprime car loans.

Lenders still have requirements applicants must meet for second chance loans, such as a minimum income threshold and a down payment requirement, but they place far less weight and importance on a consumer's credit score.

The Two Basic Types of Second Chance Auto Loans

There are two basic types of second chance auto loans:

  • Those Financed by Subprime Lenders through Special Finance Dealerships - Dealerships that have special finance departments make auto loans available to borrowers with bad credit. Lenders willing to accommodate borrowers with poor credit work with these dealers. They are similar to "traditional" auto loans in the sense that buyers take delivery of their cars at dealerships and make their payments to the lender.
  • Those Financed by Dealerships In-House - Some dealerships do not use third-party lenders and instead finance vehicles themselves. Because they do not use outside lenders, these dealers don't normally run credit checks. This makes it possible for people with credit issues to finance a vehicle. At these so-called "buy here pay here" dealerships, payments are usually made directly to the dealership.

However, it should still be noted that the majority of dealerships can't accommodate people with poor credit. Additionally, of those dealers that do work with bad credit borrowers, many are independently operated and have their own lenders with specific programs. These factors can make it difficult to find the right dealership.

How We Can Help

CarsDirect helps people with imperfect credit scores connect to car dealerships in their area that may be able to give them a second chance. We are teamed up with one of the country's largest networks of special finance dealerships to ensure everybody gets a fair chance.

We can help you find a local dealer that is ready to try to get you back on the road. Our service is free and fast, and comes with no obligations, so you have nothing to lose. Get started today by completing our online auto loan request.

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, Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


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