What Are My Approval Odds for a Car Loan with Bad Credit?

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - June 12, 2019

Figuring out exactly what your approval odds for a car loan are isn’t easy when you have bad credit. What you need to do before you head to your bank or local dealership is know where you stand in terms of finances and credit. The more prepared you are, the better your approval odds can be.

Preparing Yourself for an Auto Loan

With bad credit, you most likely aren’t going to get pre-approved for auto financing. If you have a strong relationship with your bank or credit union, you should try to get pre-approved anyway – it’s possible you could in some cases. If that doesn’t work, your next best chance is with a subprime lender, and it helps if you know what they look for when approving bad credit car buyers.

First, you need to be aware that subprime lenders run credit checks. While your credit score does play a role in your approval odds, credit isn’t the only thing auto lenders look at. Subprime lenders ask that you bring in additional information in order to verify the information on your application.

The specifics of these additional requirements vary by lender, but they typically ask that you have the following ready:

  • Proof of income – Most subprime lenders require that you make at least $1,500 to $2,000 a month before taxes from a single source. Bring in a copy of a recent computer-generated pay stub showing year-to-date earnings.
  • Proof of residency – Bring in a recent utility bill in your name at the address listed on the application.
  • Proof of a phone – Bring in a recent phone bill in your name. It can be a landline or contract cellphone, but not a pre-paid phone.
  • Valid I.D. – Your driver’s license or a valid state I.D serves as proof of identification.
  • Down payment – You usually must make a down payment, and subprime lenders generally ask for at least $1,000 or 10% of the vehicle’s selling price, whichever is less.

These lenders also typically require a list of five to eight personal references. You don’t need it right away, but you do need to provide it before you take delivery. Make sure your references are aware that they could be contacted by your lender, and that the reference list is complete with names, addresses, and phone numbers.

How to Improve Your Chances of Auto Loan Approval

Even if you have everything ready to go, you may still get turned down for a bad credit car loan. But don’t lose hope. To increase your auto loan approval odds, you may be required to make a larger down payment or add a cosigner to the loan.

Lenders like to see you contributing to the loan, and the more you put down, the higher your approval odds usually are. If you’re unable to make a larger down payment, adding a cosigner could help. Having a cosigner is sometimes even required, depending on the lender, but even if one isn’t it could certainly increase your approval odds.

Essentially, you “borrow” your cosigner’s good credit when you add them onto the loan. They don’t share any rights to the vehicle, and you can’t combine incomes, but the car loan is listed on their credit reports. So, if you miss a payment or default, your cosigner’s credit score is affected just as yours is.

Ready to Get Started?

It can be hard to get approved for an auto loan if you're dealing with poor credit. The good news is there are plenty of lenders out there that know how to handle various bad credit situations, and we can connect you to one.

At CarsDirect, we help credit-challenged car buyers get the financing they need by matching them to local special finance dealers. Getting started is a breeze, just fill out our free and easy auto loan request form today!

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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