Category Archives: Bad Credit Car Loans

All about getting loans with bad credit especially for buying a car!

bad credit, auto loan

Be Careful with Guaranteed Bad Credit Auto Loan Approval

If you have been putting off a car purchase because you know that your credit is bad and you don’t want to face a rejection at a dealership, an ad for “Guaranteed Bad Credit Auto Loan Approval” may be enticing. You may see a commercial on TV or receive a flyer in the mail that says “Bad Credit? No Problem!” and think that you’ve found your solution. But, sadly, this may not be the case.

Many states will not even allow dealers to advertise “Guaranteed Bad Credit Auto Loan Approval.” Why? It can be a very deceptive claim.

The Slippery Slope of “Guaranteed Bad Credit Auto Loan Approval”

It is true that no matter how damaged your credit is, some kind of auto financing can be arranged. However, there’s no guarantee that you’ll like the deal you get.

When a dealership runs a “Guaranteed Bad Credit Auto Loan Approval” promotion, it is understood that a lot of shoppers might show up at the lot. Some of these customers may think that their credit is worse than it is in reality, and others might have a credit score that’s on the high side of low. These are the consumers that the dealers want to sell to because they can typically be approved for financing.

What Can Happen to Car Buyers with Really Bad Credit

Other customers who show up, the ones who have really bad credit credit, may not be so lucky. In order to not be accused of false advertising, a dealer might offer them something, but it could be a “deal” that is on the unreasonable side.

  • They may ask the buyer to provide a down payment that is equal to 50%-75% of a vehicle’s selling price, knowing that the customer isn’t looking to put up thousands of dollars in cash.
  • Because it might be necessary to assign a high interest rate to a buyer with very bad credit, the monthly payment could end up being well outside of the customer’s budget.
  • The dealer may only be willing to sell the customer one car on the lot, and this vehicle may be older and have higher mileage.

If you need to finance a car and know that you have severe credit issues, you don’t have to put yourself at the mercy of dealers who make unrealistic claims just to get people in the door. You don’t have to waste time with dealerships that are not qualified to work with your unique situation. There are auto loans available for nearly every type of buyer, but you may need a little help finding one.

Honest Help with Affordable Financing

Auto Credit Express only works with dealers who are qualified to handle most credit types. So, we can match you with one of these dealers quickly and easily.

We help thousands of customers every day. And we look forward to making your car buying experience as simple and hassle-free as possible. Our service also costs nothing and comes with no obligations. Go ahead and fill out our fast and 100% secure auto loan request today.

How Can a Cosigner Help on a Bad Credit Auto Loan?

How Can a Cosigner Help on a Bad Credit Auto Loan?

Bad credit auto loans are designed to help those struggling with credit. If you don’t meet the requirements set by the lender, a cosigner can help you get approved by attaching themselves to the loan.

3 Benefits to Having a Cosigner

A cosigner is someone who signs the loan with you. They usually need to have good credit if you, the primary borrower, have bad credit. By attaching themselves to the loan, their good credit can give your application the boost it needs in order for you to get approved.

Here are three benefits that come with having a cosigner on a loan:

  1. Increased approval odds – When you add someone who has good credit to a bad credit car loan application, your approval odds usually go up.
  2. Helps you build credit – Adding a cosigned auto loan to your credit mix is a great way to build credit. Each monthly payment that you make on time can improve your credit score.
  3. May help you save money – Although not as common, it’s possible that you could save on your car loan if having a cosigner helps you qualify for a lower interest rate.

Keep in mind that your actions on the auto loan also affect your cosigner. If you miss a payment, your cosigner’s credit score also drops along with yours. It’s important to keep your cosigner in the loop with what’s going on for this reason.

Requirements Your Cosigner Must Meet

You’ve read about the benefits of having a cosigner, but what does it take for someone to be a cosigner? A cosigner can be anyone, from a close friend to a family member, but they need to qualify for the car loan on their own.

This means two things: your potential cosigner must have good credit, and they must have enough income. Most lenders look at both you and your cosigner’s FICO credit scores to determine if you qualify. A good FICO score is anywhere from 670 and higher, according to Experian.

For the income requirement, subprime lenders generally require a minimum monthly income of around $1,500 to $2,000 before taxes. They also have to have a qualifying debt to income (DTI) ratio, which determines if their monthly budget has room for an auto loan.

To calculate your DTI ratio, add up your monthly bills, including the estimated car and insurance payment, and divide the total by your pre-tax monthly income. Subprime lenders typically won’t accept a DTI ratio that’s higher than 45% to 50%.

The Bottom Line

Having a cosigner on a bad credit auto loan can help you get approved, and one may even be required in some situations. Make sure you discuss the role your potential cosigner is going to play, and make sure they’re OK with putting their credit on the line for you.

If you’re ready to find financing, Auto Credit Express is here to help. We match people to local special finance car dealerships when they’re dealing with less than perfect credit.

All you need to do is fill out our free auto loan request form, and we’ll work to get you connected to a dealer near you.

money bags, down payment

How Much Do I Have to Put Down on a Car with Bad Credit?

Car buyers with bad credit often look for a way to get a car loan without a down payment. With all the advantages that come with putting money down on a car, you’ll be better off with a take-charge approach. Take this question we received last month:

“I’d like more info about the process. I do not have a down payment ready quite yet. How much generally would I need down for say a $15,000-$30,000 loan? Thanks!”

How Much Money Down Do You Need on a Car Loan?

This consumer has the right mindset: they’re preparing their car buying plan of attack in advance. Saving for a down payment is a great way to set your auto loan up for success, but how much will you need?

This consumer wants to know how much they’d need for a loan in the $15,000-$30,000 range. If they’re dealing with less than perfect credit, this person can expect to need around $1,000 for a down payment. Here’s why:

When it comes to special financing, lenders typical require borrowers to make a down payment of $1,000 or 10 percent of the car’s selling price, whichever is less. Because 10 percent of $15,000 is $1,500, many subprime lenders would only require $1,000 down (the lower number of the two).

However, keep in mind this is only the minimum amount you’re expected to have. In fact, the bigger your down payment, the better off you’ll be thanks to all the advantages that come with making one.

Reasons Why You’ll Want a Down Payment

There are many benefits that come with making a down payment, including:

  • Helps Your Chances of Getting Approved – A down payment is typically required for consumers who’re dealing with credit issues, but it also lowers a vehicle’s loan to value ratio. Learn more about how lowering this ratio can help you get approved here.
  • You Save Money in the Long Run – Putting money down up front means you borrow less money. When your loan is smaller, your monthly payments are too. More importantly, borrowing less reduces the amount you end up paying in interest charges.
  • The Option for a Shorter Loan Term – Instead of reducing the monthly payment, you may be able to keep payments in the same ball park while reducing the loan term. A shorter loan will result in lower interest charges.
  • Build Equity – Vehicles depreciate in value, and it can be a problem when you owe more on your loan than your car is worth. A down payment helps build equity and reduces the length of time you’re upside down.

Got Your Down Payment? Find a Dealer

For all the advantages that come with it, we think it’s a good idea for consumers to prepare a down payment for their car purchase. If you’re dealing with less than perfect credit, it’s also wise to locate the people who can help you find a loan.

At Auto Credit Express, we help car buyers work through their credit issues by setting them up with local special finance dealers. The dealerships in our nationwide network know what it takes to help consumers get financed. Start the process by filling out our secure and free auto loan request form today.

Why Is the Interest Rate so High on a Bad Credit Auto Loan?

Why Is the Interest Rate so High on a Bad Credit Auto Loan?

When you’re researching, you may find that borrowers with less than perfect credit tend to qualify for higher interest rates on auto loans than those with good credit. While it can be tough to determine exactly what your interest rate is going to be, don’t be surprised if it ends up being high if you have bad credit. However, there are ways you may be able to qualify for a lower interest rate.

What Determines Your Interest Rate?

The reality of bad credit car buying is that you’re more than likely going to be dealing with a high interest rate, which increases the overall cost of the loan. While your credit score plays a role in determining your interest rate, it isn’t the only thing.

Here are four other factors that determine your interest rate:

  1. Your lender – No two lenders are alike, and it’s common to see different interest rates offered by different lenders.
  2. Vehicle choice – If the car you choose is older and/or has more miles on it, your interest rate is likely to increase.
  3. Federal rate – The Federal Reserve sets the interest rate that banks loan to each other, which also affects the rates they charge borrowers. This rate can fluctuate quarterly.
  4. Residence – The state you live in can affect your interest rate, as can the city.

As we mentioned, we can’t tell you exactly what your interest rate is going to be. However, you should be aware of what might determine your rate ahead of time so you’re not caught off-guard.

2 Ways to Lower Your Interest Rate

Now that you know what goes into determining your interest rate, how do you get the lowest rate? There are two key things that can help you lower your interest rate:

  1. Improve your credit score – The easiest way to get a better interest rate is to improve your credit score. You can do this by paying all your monthly bills on time, and keeping your credit card balances as low as possible.
  2. Add a cosigner or co-borrower – Although this isn’t foolproof, you may be able to lower your interest rate by adding a cosigner or co-borrower to the loan. When you include a cosigner or co-borrower, you “borrow” their good credit to get approved for financing. You have a better chance of getting a better interest rate with a co-borrower, since you can combine incomes if they are your spouse. Make sure you check with the lender about this ahead of time.

Getting the Auto Loan You Need with Our Help

The bottom line is that the better your credit score, the lower your interest rate typically is. But getting a good interest rate isn’t always possible if you have bad credit or no credit, which can put a damper on your car buying experience.

Getting approved for an auto loan can be a challenge on its own if you’re dealing with less than perfect credit, but Auto Credit Express can point you in the direction of a dealership that has the lending resources you’re looking for.

All you need to do is fill out our fast and free car loan request form, and we’ll get right to work connecting you to a local dealer!

Saying “No” to Long Auto Loan Terms When You Have Bad Credit

Saying “No” to Long Auto Loan Terms When You Have Bad Credit

A bad credit score typically means a higher auto loan interest rate, which is exactly why you should opt for the shortest loan term you can afford!

The Cost of Long Loan Terms

Unless you qualify for a 0% interest rate new car deal, you’re going to be paying interest charges during your loan term. The higher your interest rate and the longer the loan, the more you’re going to be paying in interest charges.

Auto loans are almost always simple interest loans, meaning you’re charged interest on the remaining balance of the loan. The faster you pay off the vehicle, the less you’re charged in interest. This is why it’s in every borrower’s best “interest” to choose the shortest loan term they can afford.

People with bad credit or no credit typically qualify for higher interest rates. If you get a high interest rate, it may mean that your credit history isn’t the best. Having no credit isn’t a bad thing, necessarily, but it can make you a higher risk as a borrower. If you’re a bad credit borrower with a rocky credit history, it means you’re likely to need a subprime lender to get financed, and you’re going to need to work at repairing your credit history.

Car loans can be a great way to build or rebuild your credit if you stay current on the payments. Plus, having a stronger credit history can help you qualify for lower interest rates in the future. Right now, though, there are ways to help offset the higher interest charges you’re likely to face.

Length of Your Loan Term

It may be tempting to go with the longest loan term possible, and we don’t blame you. The longer the loan term, the smaller the monthly payment. It’s easy to choose this option because it frees up more income each month. But you may not see the negative impact of a long loan term at first glance.

To help illustrate the effects of a long loan term, let’s use this example:

  • Auto loan amount: $10,000
  • Interest rate: 12%
  • Loan term: 84 months

With this loan, you’d end up paying $4,829 in interest, and a total of $14,829 for the car, although you only financed for $10,000. The interest charges in this example equal nearly half of the amount you originally financed.

Now, let’s shorten that loan term:

  • Auto loan amount: $10,000
  • Interest rate: 12%
  • Loan term: 60 months

With a loan term of 60 months, you’d end up paying $3,346 in interest, and a total of $13,346 for the vehicle. Just by shortening the loan term, you’d be saving $1,483 – about six car payments!

While the longer loan term means paying $46 less each month for your vehicle, it costs you well over a thousand dollars over the course of the loan. When you’re financing anything, you have to think long term – and stretching your loan to the max can mean spending extra cash over the life of the loan.

Down Payments and Interest Charges

If you don’t want to extend your loan term but you’re looking to lower your monthly payment, a down payment can mean big savings in interest charges and car payments. Also, a trade-in with equity is a great way to lower the amount you’re financing and can help you meet the down payment requirement of bad credit auto lenders.

Using that same example as above, now let’s add a down payment:

  • Auto loan amount: $10,000
  • Interest rate: 12%
  • Loan term: 60 months
  • Down payment/trade-in equity: $2,000

With cash down, the loan amount drops to $8,000, your monthly car payment would be $178, and the total interest you’d pay is $2,678. Combine a down payment and a more favorable loan term, and you’re looking at a lot of savings!

Bad Credit Car Loans

While having bad credit means you’re likely to only qualify for a higher interest rate, this doesn’t mean you have to settle for an enormous car payment or pay thousands extra in interest charges.

Stretching the length of your loan term is very tempting – but it costs you more. Additionally, the longer the loan term, the more vehicle payments you have to worry about. The quicker you pay off the car, the less you spend upside down on the loan, and the sooner you’re going to have one less bill to pay each month.

If you’re a bad credit borrower and you’re looking for your next auto loan, we want to help with that. Here at Auto Credit Express, we know the ins and outs of car financing because we have a nationwide network of dealerships that work with borrowers in many types of credit situations. Start here with us and complete our free auto loan request form, and we’ll look for a dealer in your area with bad credit lending options.

7 Tips for Preparing for a Car Loan With Bad Credit

7 Tips for Preparing for an Auto Loan With Bad Credit

When you have credit issues, it helps to walk into the car buying process prepared. We’ve got a list of seven things to consider, prepare for, and do, all before you head to a lender or dealership for your next auto loan with bad credit.

1. Check Your Credit

If you have credit issues, you should know where you stand. Right now, you can request your credit reports for free, weekly, until April 2021. This is a great opportunity for credit repair and learning where your credit stands every week, so you can spot your credit weaknesses and strengthen them up before you apply.

You can also look through your reports for errors, duplicates, or just old accounts and work to clean up your reports to help boost your credit score. Auto lenders review your reports, so you should know what’s on them before they pull them. You can also check your own reports without worry, since checking them won’t harm your score.

You can check your credit score in many different ways. See if your bank or credit card provider offers free access to it. If not, you can pay a small fee to get it from FICO, the credit bureaus, or an online service like our trusted partner. Whatever you do, try to get your FICO credit score, as this is one used most by lenders.

2. Save for a Down Payment

As a general rule, you’re going to need a down payment to get into your next car loan if you have bad credit. If you work with a subprime auto lender (aka a bad credit auto lender), expect to need at least $1,000 or 10% of the vehicle’s selling price as a down payment.

You can always put down more than the minimum amount required to help lower your monthly payment, or possibly help get yourself into a nicer car. If you have a vehicle that you’d like to finance but the monthly payment is over your budget, a down payment can help you close that gap.

3. Prepare Your Trade-In

If you don’t have the entire down payment amount you need in cash, you can also use an equity trade-in. For a trade-in to help you meet a payment requirement, you need to either own the car outright or the vehicle has to have equity.

If you owe less than what car’s value, that difference is called equity and it can be put toward your next vehicle’s selling price. If you owe more than what the car is worth, that’s called negative equity, and it won’t help you meet the down payment requirement of bad credit auto lenders.

To get an estimate of how much your trade-in could be worth, you can look up prices on sites like Kelley Blue Book and NADAguides. And if you still owe on your trade-in, contact your lender and request a payoff amount, and then subtract that amount from the estimate you got online to see if you have equity.

This way, you can walk into a dealership with a ballpark estimate of what you may be offered. Just keep in mind that the actual cash value of your trade-in is what a dealer is willing to offer. There’s usually room for negotiation, but you won’t have any bargaining power if you don’t know what your trade-in is worth beforehand!

4. Shop for Auto Insurance Rates Now

If you’re financing a vehicle, you need full coverage auto insurance. Luckily, there are tons of insurance companies out there, and getting a quote is relatively easy (thanks to the internet).

If you have a rough idea of the car you’d like to finance, you can contact an insurance company with the vehicle’s information, and they can usually give you a quote over the phone or even online. This can help you prepare your budget, and you can take your time to shop for insurance while you’re shopping for an auto loan.

You’re also going to need proof of car insurance before you can drive your next vehicle off the dealership’s lot, so it’s never too early to start comparison shopping.

5. Consider a Cosigner or Co-Borrower

As a borrower with less than perfect credit, it may be worth it to look into enlisting a cosigner or co-borrower to help increase your chances of getting approved. They sound similar, but they have different meanings and can help you in different ways.

A cosigner is someone that lends you their good credit and is legally obligated to make the car payments if you can’t or don’t. They are by no means responsible for paying the car loan with you each month, since you’re going to have to qualify with your income alone to be considered for financing. A cosigner is a last-resort payer on the loan.

Many borrowers ask a parent or a close family member to cosign on a loan with them. If you’re a new borrower or you have bad credit, but you have the income to pay for an auto loan by yourself, this could be the route for you.

A co-borrower, on the other hand, is a life partner or spouse who becomes equally responsible for the car loan alongside you. You and the co-borrower would combine your incomes and expenses together and both gain equal rights to the vehicle if you qualify for auto financing.

If your main issue with getting approved for a car loan is that you don’t have enough income, a co-borrower could be what you need to boost your approval chances.

6. Pay Down Your Debts

When you apply for an auto loan and you have poor credit, your lender is likely to calculate your debt to income (DTI) ratio to see if you can afford to take on a car loan.

This is a simple ratio that compares how much income you’re bringing in each month to your expenses going out. If you have high credit card debt or other loans taking up your income, it could mean your DTI ratio is too high for you to be considered for an auto loan. Typically, bad credit lenders don’t approve borrowers with a DTI ratio of more than 45% to 50%.

You can take a look at your expenses each month and work to pay down your debt to help free up your monthly income if your DTI ratio is too high. As a bonus, if you pay down your credit cards to below 30% of their limit, it helps to improve your credit score!

7. Work With the Right Lender

When you have less than stellar credit, you may find getting approved for a car loan with a traditional lender to be tricky. Lenders from credit unions, banks, and the captive lenders of automakers, tend to prefer borrowers with good credit, so working with a subprime lender that specifically works with bad credit borrowers may be a better route for getting financed.

Subprime lenders have the resources to work with many different credit situations, including post-bankruptcy, tarnished credit, and situational bad credit due to illness or other life events.

They can work with these borrowers because they consider more than just credit score, but subprime lenders aren’t available everywhere. They work remotely through some dealers, so looking for the right lender starts with finding a special finance dealership.

Taking the Next Step in Auto Financing

Preparing for a car loan isn’t always as fun at test driving vehicles – but it can be vital to your success in getting behind the wheel. If you’re ready to take the plunge and look for the right lender for the job, start with us at Auto Credit Express.

We match bad credit borrowers to special finance dealers in their area with the lending options for their unique credit situation. Begin by filling out our quick, free auto loan request form.

Can You Buy Your Dream Car If You Have Bad Credit?

Can You Buy Your Dream Car If You Have Bad Credit?

Many people would love to have a car that boasts luxury and comfort, style and stunning design, superb performance, and high-tech features. However, owning a dream car can be expensive, and for those with less than perfect credit, it can seem like an impossible dream. While some people are able to raise the money to invest in their dream vehicle, there are many others who have such bad credit that they simply cannot get mainstream lenders to approve their applications.

However, the news is not all bad, as there are companies that can offer online bad credit car loans. These are ideal for those who have a bad credit score and history, but who want to raise the money to purchase the vehicle of their dreams. Of course, you need to ensure that you can afford the repayments on the car loan, otherwise, you could end up with even worse credit. As long as you make payments on the loan on time, you can get the car you want and give your credit score a boost.

Getting the Right Loan

Generally speaking, loans for those with bad credit come with higher interest rates than those for people with good credit. So, when you take out a bad credit can loan, you should not expect to get rock bottom rates. However, if you find the right lender, you can get reasonable rates and you can raise the finance you need for your dream vehicle. In order to keep repayments down to an affordable amount, you can look at taking out the finance over a longer period.

Going from one company to another can be time-consuming and difficult for those with other commitments. So, you can go through companies that have a database of auto dealerships that offer finance to those with bad credit and have the type of vehicle you need. This can cut out a lot of the time and hassle involved in getting auto finance. It means you only have to complete one application, and you can then get a quick decision.

Before you commit to any sort of finance or loan, you need to ensure you look at your budget. It is imperative that you can afford the repayments, otherwise, you will find yourself under increased financial strain and you could further damage your credit as well as losing the vehicle. So, check to see what the loan amount and repayments would be on the car of your choice and then do some number crunching to work out affordability.

Of course, you also need to make sure you purchase a vehicle that is right for you. While you may have your eye on that two-seat sports number, if you have a family that you need to ferry around, you may need to re-think! You can get some stunning luxury, high-performance cars suited to all needs and circumstances.

With the right auto finance, that dream car can still be yours even if your credit is damaged.

How Much Down Payment Do I Need for a Car Loan with Bad Credit in Los Angeles?

How Much Down Payment Do I Need for a Car Loan with Bad Credit in Los Angeles?

When you have bad credit, you typically need to have a down payment in order to get approved for an auto loan, but how much money you need to put down often depends on the type of dealership you go to in Los Angeles. While subprime lenders generally have a minimum down payment requirement, we recommend you put more down if you can.

Down Payment Requirement for Bad Credit Car Loans

What do bad credit lenders in Los Angeles look for when it comes to a down payment? Although the amount usually varies, many ask for a minimum of $1,000 or 10 percent of the vehicle’s selling price, whichever is less. You can either pay with cash, trade-in equity, or a combination of both.

This means that if you choose to finance a car selling for $5,000, it’s very possible you could put $500 down and meet the requirement. Again, keep in mind that the down payment required varies, so you should ask your dealer about this to find out how much you really need.

How a Larger Down Payment Can Help

Did you know that a larger down payment actually helps you in the long run? It’s true, and we even recommend that bad credit car buyers in Los Angeles put more money down than required if they can.

There are many benefits to making a larger down payment, but the biggest one is that you save money. Not only does it lower your monthly payment, but it decreases the amount of interest charges you pay overall.

Let’s take a look at an example. Mike is buying a used vehicle that sells for $13,700, plans on financing it for 60 months (five years), was approved for an interest rate of 18 percent, and has a trade-in that’s worth $2,300. Here’s what his car loan would look like with different down payment amounts (note: calculations don’t include tax, title, and license fees):

  Down Payment 

  Monthly Payment 

  Total Interest Paid 




$1,000 (typical minimum)



$2,300 (trade-in amount)



$3,300 (trade-in plus $1,000)



If Mike wants the most bang for his buck, he should consider applying his trade-in plus some additional cash. Interest charges are costly with bad credit because it’s tough to qualify for a lower rate, but putting more money down helps offset these costs.

The Bottom Line

The larger the down payment, the cheaper your auto loan is going to be, and we all know how expensive Los Angeles can get. We also know how hard it can be to find financing when you had bad credit.

Luckily, Auto Credit Express can help you find a local dealership that knows how to work with bad credit. We’ve been helping Angelenos get connected to dealers in their area for over 20 years. Fill out our free car loan request form right now, and we’ll get to work matching you with a local dealership.

Do I Get to Pick My Car with a Bad Credit Car Loan?

Do I Get to Pick My Car with a Bad Credit Car Loan?

You do get to pick your vehicle when you take out a bad credit car loan at a dealership. However, your vehicle choice is typically limited to what you qualify for and the requirements of the lender, so you may not be able to get the car of your dreams or qualify for a new vehicle. Keep reading if you’re wondering about car requirements and other bad credit auto loan rules.

Vehicle Requirements for Bad Credit Car Loans

More than likely, you’re going to be working with a subprime lender if you have less than perfect credit and need a vehicle. These lenders are bad credit auto financing experts, and work with many credit-challenged consumers.

In order to get approved, the type of car you choose must fit their requirements. They vary by lender, but your vehicle typically must meet these three requirements:

  1. Age – Subprime lenders have age limits for cars they finance. Typically, this means they won’t finance a vehicle that’s over 10 years old, although some cap this at seven years, so make sure you ask the dealer about this.
  2. Mileage – Just like age, lenders have a maximum mileage they consider. Generally, a car must have less than 100,000 miles on the odometer, but this varies by lender and model year.
  3. Amount financed – Each lender sets the minimum amount they’re willing to finance. Usually, this is $5,000, but it also varies by lender. Keep in mind that this is the total amount being financed, not the vehicle’s selling price. You could finance a car with a selling price under $5,000 as long as the amount financed with extras like an extended warranty meets the lender’s minimum.

What you qualify for also depends on your specific situation. The lender evaluates your application and issues a payment call to the dealership. This lets the dealer know which vehicles in their inventory you qualify for and can choose from.

Other Requirements for Bad Credit Financing

Of course, the vehicle you pick is just one piece of the bad credit auto loan puzzle. When it comes to qualifying for a loan, each subprime lender has different requirements borrowers need to meet, but they’re going to ask that you prove these three things:

  1. Income – A recent computer-generated pay stub showing year-to-date earnings is needed. Subprime lenders typically require that you make a minimum of $1,500 to $2,000 a month before taxes from one job.
  2. Residence – A recent utility bill in your name showing the address listed on the application to serve as proof of residency.
  3. Phone – A recent phone bill in your name that can be either a landline or contract cellphone is also required.

The Bottom Line

You do get to pick the car with a bad credit auto loan, but what you qualify for depends on your situation and the lender’s requirements. For more help, you can use our payment calculator and car loan estimator.

That’s not all Auto Credit Express offers, though. We can also connect you to a local dealership that has the lending resources you’re looking for. We’ve been helping credit-challenged consumers find financing for over 20 years.

Our service is easy, free, and comes with no obligation to buy anything. Get started right now by filling out our auto loan request form!

Rubique Carloan 3 653x435 1

Are There Car Loans for People with Bad Credit?

Are you looking for a car loan, but you have bad credit? Have you been turned down for car loans in the past? There may be options available to you that you haven’t considered. Read on for details about bad credit car loans.

Bad Credit Car Loans: Where’s the Deal?

First of all, let’s be honest. If something sounds too good to be true, it probably is, right? Well, I don’t think car loans for people with bad credit are the exception to the rule, since there are some definite financial drawbacks to such loans. For some people, however, these loans are the only option available.

Available Loans

Many companies offer car loans to people with bad credit, as long as you have a stable work history and are making more than $1,500 a month gross. You’ll have to prove your income and work history with pay stubs or tax records. You may also be required to make a $2,000 to $3,000 down payment, if you’ve had a repossession or collection account during the past year. If you do qualify for one of these car loans, your interest rate will likely be much higher than most banks would charge.

Avoiding the Need

Obviously, the best way to avoid having to resort to bad credit car loans is to keep your credit in good standing. Always pay your debts on time – late payments really hurt. The credit bureaus keep track of 30-, 60-, and 90-day late payments. If you are 120 days late on a bill, your delinquent account will likely be sent to collections. Nearly every type of business will send your account to collections if you’re 120 days past due, including hospitals, cell phone companies, and utility providers (power, gas, phone, etc.). Once this happens, your credit score drops like a rock, says By the way, late payments and collections stay on your credit report for seven years, and bankruptcies remain for ten years, so be responsible. Otherwise, you may find yourself needing these car loans because of your bad credit.


Ever heard of a cosigner? This is probably your best alternative to bad credit car loans. Finding someone with a strong credit score to cosign on the loan will save you from having to pay the high interest rates associated with these car loans. In addition, having a cosigner will allow you to increase your credit score as you consistently make your loan payments on time. This may be the best way to get your score high enough so you won’t have to look for these high interest rate car loans in the future. Just make sure to make your payments on time — you don’t want to ruin the credit of someone who is helping you out.

Give the Banks a Reason

Where to Get No Money Down Bad Credit Auto Loans

Where to Get No Money Down Bad Credit Car Loans

When you have less than perfect credit, finding a bad credit auto loan with no money down is going to be very difficult. A down payment is nearly always required with subprime financing as well as with tote the note and buy here pay here (BHPH) dealerships. The good news is that the down payment needed is usually reasonable, and you don’t have to use only cash to cover it.

Down Payment Requirements

Just how much you need for a down payment depends on the lender’s requirements. Typically, subprime lenders look for a minimum of $1,000 or 10 percent of a vehicle’s selling price, whichever is less. So, it’s very possible you could only need $500 down. BHPH dealers have a different approach, as their down payment requirement is usually dependent on the cost of the car. These dealerships could require more than a thousand down, depending on the vehicle you choose.

It doesn’t hurt to ask what a lender’s down payment requirements are before submitting an application, but you can – and should – save up for a down payment in the meantime.

Making the Down Payment

Have you heard of the 20/4/10 rule before? This budgeting rule states that you should make a down payment of 20 percent, finance a car for no more than four years, and have a monthly payment that’s 10 percent or less of your pre-tax monthly income. It’s a good starting point when figuring out how much you should be spending on a vehicle, but you don’t have to follow this rule to a “T.”

Putting 20 percent down comes with a number of benefits, but it can be a lot of money for borrowers on tight budgets. It’s also well above the minimum amount required by most subprime lenders. If you want to aim for a down payment that’s close to 20 percent, but aren’t sure how to reach the down payment requirement, there are some options:

  1. Trade-in equity – If you have a trade-in with with an actual cash value that’s more than the loan balance (if it’s still being financed), you can apply that equity toward the down payment. If you own your car free and clear, you can use its entire value as a down payment. If, however, your trade-in has negative equity (it’s worth less than the loan balance), you’re probably going to have to come up with the cash to cover the negative equity plus more cash for the down payment. You can roll over the negative equity in some cases, but you end up paying for (and interest on) the new loan plus the negative equity in your old loan when you do this.
  2. Cash – If you don’t have a vehicle to trade in, you need to come up with a cash down payment.
  3. Combination – If your trade-in equity doesn’t cover the entire down payment requirement, or you just want to make a bigger down payment, you can combine cash with your trade equity.

We’re Here to Help You

Remember, a down payment is there to help, not hurt, your chances of an auto loan approval. There are many ways you can save, budget, and get ready for a down payment ahead of time.

If you have a down payment now, but worry your credit’s holding you back from getting approved, we have a solution. Auto Credit Express has been helping people with credit problems find new and used car loans since 1999 with our nationwide network of affiliate dealers. Getting the process started is easy. Just fill out our simple and free auto loan request form, and we’ll get right to work matching you with a dealership in your area.

Do You Have a Good Job and Bad Credit? Get Approved for a Car Loan

Do You Have a Good Job and Bad Credit? Get Approved for a Car Loan!

Having bad credit doesn’t mean you won’t be able to get a new car when you really need one. If you have a good job and a steady income, you can be approved for auto financing.

Bad credit scores have been sweeping the nation since the Great Recession of 2008, and now those who were hit the hardest are getting some good news. Auto lenders are, again, lowering the requirements to get approved for a car loan. Now, all you need is:

  • A good job
  • Some sort of down payment
  • Proof of residency
  • Proof of income

This is possible because investors are starting to buy auto loan bonds that are a bit riskier. The fifth anniversary of the Federal Reserve’s policy to keep interest rates near zero is approaching, and the market for special auto financing is growing drastically.

Car buyers with damaged credit are making up a large percentage of all vehicle sales in the United States, 27% to be exact. Experian Automotive states that this is the largest percentage of subprime car buyers since 2007 when they started tracking this data. This is a huge jump from 18% in 2009 when lenders were being very stingy with car loans during the recession.

Buy a Car, Not a House

All Americans have a dream to someday own a home, but if your credit scores are less than perfect, it may be best to steer clear of that right now. The housing market hasn’t quite jumped onto the bad credit band wagon just yet.

Auto financing is easier to get with bad credit because vehicles are an underlying asset. For instance, they are more easily valued, easier to repossess, and also the loan payment is made a priority because people need the vehicle to get to and from work.

Experts from Experian say that until you rebuild your credit scores back into good standing, it’s better to opt for a new car over a new home – at least until the mortgage companies jump onto the wagon.

Cars are cheaper, and generally take a lot less time to pay off; meaning that you will have a chance to boost your credit score fairly quickly while paying your loan off. By the time you own the car outright, your credit scores should have improved and you should be able to qualify for a home mortgage at a favorable rate.

High Interest Rate Auto Loans

While most bad credit car buyers can get approved for a loan, it is often at a higher interest rate than the national average of 4.2%. These consumers pose a high risk to the lenders, and therefore, will be subject to fairly high rates.

According to Chrysler Group LLC, the average loan for a Dodge vehicle was at 7.4%, and 23% of the loans were over a 10% interest rate – which makes Dodge the brand with the highest number of loans over a 10% interest rate.

These interest rates may seem outrageously high to you, but most people with poor credit are just glad to be approved and will take just about anything. In fact, since Dodge has started offering special finance auto loan approvals, their sales have been increasing – as of October their sales have increased by 17% from last year, making it their 43rd straight month of increased sales. They’re obviously doing something right!

The Key to the Auto Recovery

There is debate that the key to recovering the automotive crisis was lenders loosening the reins on the credit requirements. Some people say that this is only going to cause more issues for the consumer when their interest rates are so high that they can no longer afford their loan payment; while others say that, with all the discounts and incentives being offered by dealerships, this outweighs the interest rates and helps keep the loans affordable.

Regardless of what the outcome is, the customers that have recently gotten a car on credit are extremely thankful for the opportunity. If they continue to make their payments on time and improve their credit scores, they may be eligible for auto loan refinancing in the near future. This will allow them to qualify for a lower interest rate on the loan and get a lower monthly payment.

As We See It

Subprime lenders are popping up everywhere throughout the United States and they have become lifelines for some bad credit buyers that are desperate for a new car. While you may be paying a higher-than-average interest rate, it’s a way for you get to and from work every day and help yourself to qualify for a better rate on your next auto loan.

At Auto Credit Express, we work with a large network of car dealerships accepting customers with bad credit scores, and they have the tools and experience needed to get you approved for a subprime auto loan. If you’re in the market for a new car and want to take advantage of the opportunity today, you can use our online car loan request form to get started.

Using Your Trade In on a Bad Credit Auto Loan

Using Your Trade In on a Bad Credit Car Loan

Using your current car as a trade-in and down payment on a bad credit auto loan will work only if it meets certain requirements.

Car Loans with Bad Credit

Unless it’s paid off, if you’re planning on trading in your current vehicle and financing with bad or no credit auto loans, you may want to keep on reading.

We’ve seen this situation before here at Auto Credit Express, where we’ve been working with bad credit car loans for more than 20 years. During these years, we’ve helped hundreds of people finance a bad credit car.

We show buyers how to avoid a tote the note dealer (outside our retail areas you can fill out our online auto loan request form), and educate them on the loan process (to prevent repossession) which includes the importance of trade-in equity.

The Appraisal

Trade equity is the difference between what a car is worth and how much is owed on it.

During the appraisal process, the dealer will assign a value to your car. Many customers are surprised that their car isn’t worth as much as they thought it would be. This is because NADAguides and Kelley Blue Book values that most consumers have access to should only be thought of as estimates.

Auction values that are available only to dealers are more up to date. In addition, the dealer might also have to replace tires and recondition and detail it. These are all costs that reduce a car’s trade-in value.

If you think that you should be able to get more for your vehicle, you can always sell your car yourself. You can receive an instant offer from our trusted partner or go through the process of selling it privately.

Trade-In Equity

Unless the vehicle is paid off, the next step is to determine its trade-in equity. If your car is paid off, the entire trade value is equity. If the trade-in value is more than what you owe, the difference is trade equity.

If, however, the trade-in value is less than what you owe, then the difference is known as negative equity.

Dealing with Negative Equity

Since most problem credit lenders require a down payment, you’ll need enough trade equity for the down payment. If it isn’t enough, the difference can be made up in cash.

But if you have a negative equity trade-in, you’ll need to come up with a cash down payment plus enough to cover the negative equity in order to meet the down payment requirement of the lender.

Even if a lender allows you to trade in a car with negative equity without covering the balance owed – and this is a big “if” – the situation won’t be good, because you essentially end up paying finance charges on two cars at once.

When you’re dealing with the high interest rates of a problem credit auto loan, this can become very expensive.

When to Do It

Should you ever do a negative equity trade? Possibly, but only do it if it will save you money. There are two situations in which trading in a vehicle with negative equity could end up saving you money in the long run.

  1. Your current vehicle is out of warranty and necessary repairs will cost you more than you’ll spend on the increased expenses of the new loan.
  2. Your current vehicle costs a lot more to drive (say 10 miles per gallon versus 30 mpg on the new car) and the added expenses are offset by the savings in fuel costs.

If neither of these situations exists, you end up paying for two cars at the same time – not a good thing.

As We See It

Trading in your current car if it’s paid off or you have equity in it will help reduce the amount of interest charges on a bad credit auto loan. If you’re negative in your current vehicle, trading it in only makes sense if you’re trying to avoid costly repairs or if you can offset the increased expense with a savings in fuel and/or insurance costs.

At Auto Credit Express, we have helped thousands of people with bad credit buy a car and reestablish their car credit at the same time through our network of affiliate dealers. If you need a dealership to work with, let us connect you with one near you.

If you’re serious about getting your auto credit back on track, begin by filling out our secure car loan request form now.

paid in cash

Bad Credit Auto Loans: The Proof of Income Problem if You’re Paid in Cash

Car shoppers with bad credit that get paid in cash can have a difficult time getting approved for a car loan. This is because subprime lenders (those that work with applicants with imperfect credit) require proof of W-2 income. The problem, in a lot of these paid in cash “under the table” situations, is that a buyer either doesn’t get a W-2 or it doesn’t accurately reflect their earnings.

Recently, we received this question from a consumer:

“I get paid in cash. Will you take my checking account deposit for proof of income?”

This person went on to mention that they have a poor credit score, which therefore means the answer to their question is “no.” Car buyers with credit problems will find getting approved for a car loan is difficult if they receive all (or even part) of their income in cash. Allow us to explain why.

The Problem with Being Paid in Cash

In many cases, being paid in cash means all or part of your income is “under the table” or “off the books.” This is also true for people who receive non-payroll checks, where nothing (income taxes, social security, Medicare, etc.) is withheld from their pay.

Basically, it means you either don’t receive a W-2 statement, or if you do, it doesn’t accurately reflect the amount of money you make. This is where you can run into trouble if you have bad credit and need an auto loan.

Bad Credit Auto Loans and Proof of Income

Where most traditional lenders do not, subprime lenders require proof of income. They need to verify what you make because bad credit car loans are considered riskier. So, the income verification is their way of taking a precaution.

The only thing that subprime lenders will accept for proof of income is a W-2. Most will be satisfied with a computer-generated pay stub from the past 30 days that lists your year-to-date earnings on it. In some cases, a bad credit lender may accept multiple years of professionally prepared tax returns as verification. Either way, bank deposit records do not count.

Subprime lenders are more stringent with their income qualifications for several reasons. The main one being: they’re trying to determine a practical car buying budget for you. This is why they set a minimum monthly income requirement, which typically ranges from $1,500 to $1,800. And it’s also why they calculate your debt to income (DTI) ratio.

Even if you meet the minimum monthly income level, it’s all for naught if you can’t prove it with the acceptable documentation. Additionally, if you have the proof but don’t report all of your earnings, your DTI ratio could appear way off and cause your application to be rejected.

So, not only do you need to be able to show proof of W-2 income, the amount stated on it must meet both the lender’s minimum monthly requirement and result in an acceptable DTI ratio. For most subprime lenders, your DTI cannot exceed 50% of your income.

The Bottom Line

If you’re paid in cash “under the table,” hopefully you now understand why this may prevent you from getting approved for a bad credit auto loan. That is, unless you receive a W-2 and report all of your earnings accurately.

Or, it could be the case that you meet the requirements of a subprime lender, but you aren’t working with the right dealership. At Auto Credit Express, we help people with poor credit find financing with our nationwide network of special finance car dealerships.

Fill out our simple and secure car loan request, and we’ll connect you with a local dealer that can work with unique credit situations. Our service is free and we work fast, so what are you waiting for? Get started today.

Sign and Drive for a Bad Credit Car Loan

Sign and Drive for a Bad Credit Car Loan

People with bad credit may be wondering if they can do a sign and drive for a bad credit car loan.

Sign and Drive Loans with Bad Credit

There are hundreds of websites on the internet vying for your attention if you are credit-challenged and you’re hoping to finance your next car with a bad credit car loan.

The best of these sites, such as, try to provide consumers with the information they need in order to make educated decisions about the kind of loan they should choose (such as a tote the note loan versus a bad credit auto loan).

The reasoning behind this is simple: a bad decision at this time could result in a loan these people can’t afford, which could turn into in a repossession that could lower their credit scores even further.

One of the many questions our customer service department receives here at Auto Credit Express is whether or not people with bad credit can do a sign and drive. Since we help people find second chance car loans, we though that it was about time we tried to explain sign and drive auto loans.

What Sign and Drive Means

The term “sign and drive” actually refers to a lease program that enables the buyer to enter into the lease by paying only the state taxes and title and license fees up front when picking up the car.

Normally, lease terms require the first monthly payment, plus a security deposit, be paid in addition to these fees as part of what is known in the leasing business as up-front fees or “up-fronts.”

Bad Credit Sign and Drive Loans

The majority of bad credit car loans are for buying, not leasing a vehicle. But in addition to leasing hardly being available to bad credit consumers, it should also be noted that the “sign and drive” option, itself, is usually reserved only for the best leasing customers.

Because of this double whammy, most bad credit auto loan customers won’t qualify for any type of sign and drive program.

The Alternatives to Sign and Drive Loans

While sign and drive is almost certainly not an option for most credit-challenged consumers, there are alternatives out there that can help you rebuild your credit so that eventually you may very well qualify for sign and drive lease.

As We See It

Don’t be discouraged if you can’t qualify for a sign and drive lease right now. Although you may have made some mistakes in the past, the bad credit auto loan process should be looked upon as a stepping stone to better credit. By financing a car and making your payments on time, you can use this type of loan as a step in reestablishing your auto credit and raising your FICO scores.

Auto Credit Express has helped thousands of people with bad, blemished, bruised, and tarnished credit buy cars and reestablish their auto credit at the same time. Our nationwide network of affiliate dealers specializes in bad credit car loans. If you’re serious about getting your credit back on track, you can begin the process right now by filling out our secure auto loan request form online.

For more information, feel free to visit to see what we can do for you.

Approved Bad Credit Auto Loans for Independent Contractors

Approved Bad Credit Auto Loans for Independent Contractors

If you’re an independent contractor or self-employed, you don’t have a W-2 to prove your yearly income. If you receive a 1099 at the end of the year instead of a W-2, you may find it difficult to get approved for a car loan by not meeting subprime lenders’ minimum income and proof of income requirements.

Getting an Auto Loan as an Independent Contractor

Subprime lenders generally require a minimum monthly pre-tax income of $1,500 to $2,000. When you’re a regular employee, a recent computer-generated pay stub can satisfy the proof of income requirement. If you’re self-employed or an independent contractor, you typically need to bring in your most recent tax return (or possibly two or three, depending on the lender) to prove you meet the income requirement.

Where getting approved can get tricky is if you deduct too many expenses or don’t report all of your income. The income after you’ve deducted your expenses on your Schedule C is what lenders look at. If you don’t accurately report what you make, including all tips if you work in a service industry, you could have a problem getting approved for an auto loan.

Debt to Income and Payment to Income Ratios

Besides not meeting the minimum income requirement, you could negatively affect your debt to income (DTI) and payment to income (PTI) ratios. Subprime lenders use your net income listed on your tax return to calculate these ratios. If you actually make more money than you reported, there’s an excellent chance your DTI and PTI ratios are off, which could mean the difference between an approval and a rejection. Most lenders like to see a DTI, including a car and insurance payment, of no more than 45 to 50 percent of your pre-tax income, and a PTI of no more 15 to 20 percent of your income.

For example, let’s say you record your annual income as $28,800 ($2,400 a month), but actually make $38,400 a year ($3,200 a month) and have monthly bills of $1,300. Your reported DTI ratio would be 54 percent and over most subprime lenders’ accepted range, when it’s actually at 41 percent.

As for your PTI ratio, let’s say you have an estimated combined car and insurance payment of $500. Using the same income you listed, the PTI ratio would be 21 percent. If you used the actual income amount, your PTI would be a more reasonable 17 percent.

The Bottom Line

If you’re self-employed or an independent contractor and need an auto loan, you better be listing your income information accurately and avoiding too many expense deductions – especially if you have poor credit. The income after expenses that’s listed on your tax returns is the figure subprime lenders use to qualify you for a loan when you’re self-employed. If your income isn’t the issue, but your credit is, you may still find it difficult to get financed through a traditional lender.

Luckily, our experts at Auto Credit Express can help you get started on the car financing journey. We work with a nationwide network of dealerships that are signed up with special finance lenders that look past your credit issues to qualify you for an auto loan. Take the first step toward getting matched with a local dealer today by filling out our free and secure car loan request form.

Auto Loans for People with Bad Credit and No Cosigner Exist

Auto Loans for People with Bad Credit and No Cosigner Exist

You can get a car loan with bad credit at your local dealership, but what about a bad credit auto loan without a cosigner? At Auto Credit Express, we can get you approved in minutes.

Just a few years ago, car lenders demanded that you have a good to perfect credit score to land an auto loan approval, and if you didn’t have great scores, you better have a large down payment and a cosigner ready to go. Nowadays, some lenders are loosening the reins, and offering bad credit car loans to people that don’t have a cosigner. And no, this isn’t too good to be true!

A cosigner is usually a family member or friend of the person that needs a loan but doesn’t have the credit to get one on their own. The cosigner must have a better score than the primary applicant, and be able to balance out their bad credit score. This person will be added as the co-buyer on the loan agreement, and if the primary borrower cannot afford the payments, the cosigner then becomes legally responsible to pay back the remaining balance on the loan. All timely and untimely payments are reported to both parties’ credit reports and will either help – or hurt – their scores depending on whether the payments are made on time or not.

Where to Get No Cosigner Poor Credit Car Financing

In most cases, when someone begins the car financing process; they go straight to their local car dealership, they pick out a car, and apply for the loan. When you have bad credit and you don’t have a cosigner the process is somewhat different. With damaged credit the first thing you should do is apply for a pre-approval online. This allows you to know exactly how much you can be approved for and gives you a piece of mind knowing that you won’t be turned away at the dealership.

You should be working with dealerships that offer in-house financing and don’t work with a third party finance company. These dealerships are able to construct a loan for pretty much anybody regardless of their credit history. While they suggest having a cosigner for your own benefit, they don’t require one, and you will find the process is much easier.

These dealerships are often referred to as buy here pay here (BHPH) or rent-to-own car lots. Often times, they won’t even run a credit check on you, and as long as you have a down payment you will be approved. The biggest downfall you will experience with these dealers is that, because they don’t pull your credit report to approve you for the loan, they also usually don’t report your payments to the credit bureaus. This means that in a few years when you’re looking for a new car loan you will need to visit the same dealership – unless of course you took out a secured credit card or other type of financing to build credit.

Why These Lots are Helpful for Bad Credit Buyers

The best thing about financing a used car from a buy here pay here car dealer is that they guarantee your approval. All they want to know is that you make the money to pay your car note. They don’t care about what your credit report says, and therefore, they don’t care about you having a cosigner on the loan either.

The other good thing about BHPH dealerships is that they will work with your pay schedule to make the payments more affordable for you. This is extremely helpful because:

  • Bad credit car buyers experience higher interest rates
  • Your payments will be higher with no cosigner

If you don’t – or can’t – make one lump sum payment each month, you can opt for weekly payments that are consistent with your pay schedule from work.

Cosigners Can Make Your Payments Lower

Let’s say you have someone that is willing to cosign for you, but you don’t want to ask them to take on that big of a responsibility. You may want to rethink that decision. Having someone else on your loan with a good credit score has multiple benefits for you. For instance, you will experience:

  • Lower monthly payments
  • Lower interest rates
  • Better chance of approval

Having a cosigner will give you a better chance at getting approved for a traditional dealership, and when you have a higher credit score on your application you are likely to receive a lower interest rate. This will not only make your monthly payments more affordable, but also reduce the total cost of the vehicle over the life of the loan.

Can You Finance New Cars with Bad Credit and No Cosigner?

While new cars are shinier, better looking, and cooler in the aspects of technology, they’re also more expensive. This is why buyers that are experiencing poor credit scores are suggested to look at used vehicles over new ones. It’s not that borrowers with questionable credit don’t deserve to drive a nice new car, but because of the higher interest rates that they will experience on the loan, a cheaper used car is more affordable.

The last thing you want is to end up with worse credit scores because you started missing payments on your new car loan because it is just too expensive. You can find a nice, gently used, low-mileage vehicle that fits right into your budget that you can be instantly approved for without needing a cosigner, and you will be just as happy – if not happier.

As We See It

Experiencing poor credit is never a thing to look forward to, but you should also never let it ruin your financial life. If you have learned from your past mistakes, you can get into a great used car on your own without the help of a family member or friend. You don’t have to have a cosigner or impeccable credit to qualify.

At Auto Credit Express, we have been helping people with damaged credit find a dealer in their area that will approve them for a car loan for over 20 years. To get started today, use our online car loan application to get your pre-approval. We will then set an appointment with the finance manager at one of our partnered dealerships near you, and you could be driving away in your new-to-you car as early as tomorrow!

Your options for bad credit car loans

Your options for bad credit car loans

If your credit record shows information that might be of concern to a lender, could you still be approved for a car loan? Is it a good idea to apply for a loan at all if your credit record is ‘bad’?

As we’ll see, the answers to these questions will depend on your situation and the lender’s policies, but generally speaking, getting a car loan with bad credit can be difficult and you may have fewer options to choose from compared to a borrower with a good credit history. Read about:

→ You can check your credit score for free

If you are concerned about your credit score, consider whether taking out this type of loan is a good idea at all.

Can you get a car loan with bad credit?

Having a bad credit record – and as a result, a low credit score – may not automatically rule you out of being approved for a loan by some providers. Lenders generally look at a range of factors when considering whether you are a suitable candidate for a loan. Your credit record is one of these factors, but if the rest of the information on your application meets the lender’s criteria, they might still lend money to you.

If you have a low credit score, it could be considerably more difficult to be approved, and it’s worth understanding that you might not be able to access the same loans, interest rates and other conditions that a borrower with a good credit record would.

How do lenders assess bad credit loan applications?

Lenders legally can’t provide a loan if it is not suitable for the borrower – for example, if the lender believes you would not be able to meet the repayments. Because of this, when assessing a loan application, lenders generally consider a range of factors that, taken together, allow them to decide whether the loan is suitable for the person who’s applying.

These factors can include:

  • Credit history: Most lenders will check your credit record and credit score to get an idea of your track record as a borrower. If your credit history is considered ‘bad’, then the lender may decline the loan, or could potentially still approve it, based on the other aspects of the application.
  • Income: Lenders will generally ask you to include details of what you earn in your application to get an idea of how much disposable income you have that could be used to pay off the loan. If it is a joint application – with a spouse, for example – the lender would typically consider the combined income of all applicants. Your income could include your salary, benefit payments or investment earnings.
  • Expenses: How much are you spending on day-to-day living expenses, such as rent, bills and groceries? The lender will generally factor this in too.
  • Other debt: If you have other loans to repay or credit card debt, the lender will likely consider this in the assessment.
  • Loan amount: How much money you are looking to borrow could also play a part. For example, are you wanting to borrow a large amount for a new or high-end vehicle, or a more modest sum for a second-hand car? If you are seeking a lower loan amount, you may be more likely to be approved, depending, of course, on an overall assessment that considers all other applicable factors and your personal circumstances.

These factors are generally considered in combination. For example, a hypothetical borrower with a bad credit record, but who has a high, stable income and low existing debt levels, might still be approved for a loan, depending on the amount.

Remember, though, that each lender has its own assessment and eligibility criteria for car loans, so it could be worth checking these before applying with a particular provider. The same generally applies to dealer finance for a vehicle purchase or other types of finance, such as a novated lease.

According to Moneysmart, applying for a few loans over a short period of time can look bad on your credit report. While there are steps you can take to improve your credit score, understanding the factors above, including any that are unique to a particular provider, may be helpful before you decide whether to apply.

What is a bad credit car loan?

There are some lenders who offer specialist car loans specifically for borrowers with bad credit. These loans can potentially come with high interest rates and fees, on account of the risk that goes with offering loans to borrowers with a bad credit record. As with any lending arrangement, it can be worth reading the terms and conditions carefully to ensure you know exactly what you’re signing up for.

What other car loans could be available to borrowers with bad credit?

There are different types of car loans that may be available for borrowers with bad credit, including:

  • Bank car loan: Some ‘traditional’ lenders such as banks and credit unions may offer loans to applicants with ‘bad credit’, subject to the other assessment criteria discussed above. Bear in mind, though, that it’s likely to be more difficult to get a loan with bad credit, as banks generally apply strict lending criteria to reduce the risk of customers defaulting on their loan (i.e., not being able to pay it back).
  • Dealer finance: The finance offered by car dealers works in a similar way to a bank loan. One notable difference is that loans from a dealer sometimes involve the borrower needing to make a balloon payment at the end in order to own the car. Dealers generally also carry out a careful assessment of the borrower before approving finance. This could include a credit check, but the outcome of that may not rule out a borrower automatically. Like banks, dealers may simply charge a higher interest rate to borrowers with bad credit due to the increased risk involved in providing the loan.
  • Guarantor car loans: Applicants who might otherwise not be eligible to borrow money to buy a car might be approved if someone – a family member, say – acts as guarantor for the loan. This person would take on responsibility for paying back the loan if the borrower defaulted. This arrangement removes some of the risk for the lender, instead shifting much of the risk to the guarantor. This arrangement could strain the borrower’s relationship with their guarantor, so it’s worth thinking your options through carefully before committing.
  • Secured or unsecured loans: A secured car loan, where the car would be sold by the lender to repay the loan if the borrower defaults, is generally seen as representing less of a risk to the borrower than an unsecured loan. As a result, lenders might only provide a car loan to a ‘bad credit’ applicant if the loan is secured by the vehicle being purchased. Lenders’ policies may vary, however, so consider checking with your chosen lender before applying. Even if you do get approved for an unsecured car loan (so aren’t risking the vehicle being repossessed if you default) there is always the possibility of a lender taking you to court if they have to reclaim any losses. In this situation, your credit rating would also be negatively affected.

When a borrower is approved but is seen to be more of a risk to the lender, they may have to pay a higher interest rate than a borrower with good credit. For example, some of the personal loans available for purchase of a new or used car on Canstar’s database use risk-based pricing structures. This means the lender would take account of factors such as your credit score before deciding what interest rate would apply to your loan. The borrower’s credit record is one factor that could determine what range their interest rate ends up being, but it could also depend on whether the car is new or old, as well as other variables (the loan amount, borrower’s financial situation etc.).

How to apply for a bad credit car loan

While it can be more difficult and expensive to get a car loan if you have bad credit, here are some steps to consider which may improve your chances of being approved.

  1. Check your credit score: It may help to understand exactly where you currently stand. Your credit score can change over time, so getting an up-to-date idea of how you’re tracking could help you decide whether now is the right time to apply for a loan.
  2. Improve your credit score if you can: It may be beneficial in the long run to take the time to build up your credit score before applying for a loan. A higher credit score could improve your chances of approval, and may even mean getting more favourable terms on your loan – such as a lower interest rate, for example.
  3. Understand the lender’s eligibility and assessment criteria: Taking time to understand who is likely to be approved for a loan could save you time and make sure you aren’t submitting applications that are unlikely to be approved. For example, some loans are only available to borrowers with an ‘excellent’ credit score. It may even be worth contacting the lender to make an initial enquiry, as a full application is likely to be recorded on your credit history.
  4. Gather as much supporting information as you can: The lender may ask for pay slips, bank and credit card statements, evidence of benefit payment eligibility and other evidence of your financial situation. It could help to gather together as much of this evidence as you can to support your application and be careful not to leave out any relevant  information.
  5. Develop good financial habits: In addition to the information recorded on your credit record (paying bills etc.), demonstrating good financial habits, like putting money into savings regularly, could help demonstrate to a lender that you have the financial discipline required to pay off a loan.
  6. Apply with your preferred lender: After considering your personal circumstances, as well as the eligibility criteria and other factors lenders take into account when assessing bad credit applications – it’s time to decide whether it’s appropriate for your situation to take the next step and apply with your preferred lender. If you’re unsure, it may be a good idea to take the time to speak with a financial adviser or financial counsellor about your situation.

Should I apply for a car loan if I have bad credit?

If you have a bad credit record, it could be worth thinking about any alternatives that may be available to you before applying for a car loan and taking on new debt. For example, do you have any savings you could use to fund the purchase? Or, could you wait until you have built up savings, or improved your credit record to the point where you are in a stronger position to apply for a loan?

Taking out a loan generally involves a degree of risk for all borrowers, and this can be especially true for people who already have a bad credit record. Consider seeking the advice of a professional before committing to a loan. Free financial counselling is available, such as from the National Debt Helpline on 1800 007 007.

Main image source: RomanR/ 

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Car Loans with Bad Credit and Cash Income

Car Loans with Bad Credit and Cash Income

Why car buyers with credit problems usually have a hard time qualifying for an auto loan if they receive all or part of their income in cash

Our experience

Car shoppers with less than perfect credit that get paid “under the table” often don’t understand why this practice might prevent them from getting approved for high risk car loans.

At Auto Credit Express, though, we do know why this happens because we’ve spent the past twenty years helping credit-challenged car buyers find new car dealers for their best chances at approved auto loans.

So with that being said, here’s the explanation:

Problems with income

One of the biggest reasons people with problem credit scores but with decent incomes end up at BHPH car dealers is because they either don’t receive a W-2 from their employer or the W-2 they get doesn’t show their total earnings.

In most cases these situations occur because either all or part of their income is paid to them “under the table” or “off the books” either in cash or with a check that doesn’t reflect any deductions for payroll taxes.

Even non-employees (non W-2 independent contractors), however, should still receive a form 1099-MISC reflecting their total earnings or that portion of their pay not subject to employment taxes.

But even employees paid in cash or with a regular check, are still required to file a tax return and report their income. This income, minus expenses, should be reported on Schedule C of their 1040 income tax form.

This is especially important for those with low income. Here’s why:

Income verification

While most traditional lenders don’t require proof of income in order to qualify for a car loan this isn’t the case for subprime auto lenders.

When requesting a car loan from one of these lenders, you’ll be required to prove how much you earn. Not only that, but proving this income can only be done with a W-2 or, lacking this documentation, with professionally prepared tax returns (usually more than one year, since a certain level of income must be established). Without these documents, your income can’t be proven to these lenders – even if you have deposit records from your bank.

High risk lending

Subprime auto lenders typically establish minimum income levels that borrowers are required to meet to qualify for their loan programs. They use W-2 income or, in the case of non-employees, the after tax income reported on tax returns, to compute debt-to-income ratios so that they can determine a logical range for the applicant’s car budget.

This can affect people with cash income in a couple of ways:

1. Minimum monthly income requirements typically range from $1,500 to $1,800. Applicants earning at this level but with W-2 forms and/or tax returns that don’t show it will not qualify for a loan.

2. If an applicant’s reported income meets these requirements but the actual income is higher, there’s always the chance that monthly expenses could be excessive. For example, if an applicant’s actual monthly income is $3,500 and that person has monthly expenses of $1,800, the debt to income ratio would typically be no problem. But if that individual reports income of only $2,000 per month, the debt ratio then becomes too high and the loan will be denied.

The Bottom Line

If you have credit problems and all of part of your income is paid to you in cash or with a non-payroll check, you need to understand that failing to report all your income could result in a denial of credit for a car loan. In this situation, the only remaining option for most buyers is a tote the note car dealer.

One thing you should know if you’re not facing this issue: Auto Credit Express matches applicants that have experienced car credit issues with dealers that can arrange for auto loan approvals.

So if you’re ready to take the next step, you can start now by filling out our online auto loans application.

No Money Down

Can You Get a Bad Credit Car Loan with No Money Down?

Many car buyers with credit issues want to know if they can get an auto loan with no money down. Take this question we recently received from a potential applicant:

“Is it possible to get approved for auto financing and put $0 down?”

Yes, it’s possible to get approved for a car loan with zero down. However, this is typically only an option for those with great credit. In fact, getting approved for a no money down auto loan can be a breeze for those whose credit is in tip-top shape.

On the other hand, if you are dealing with imperfect credit (which many people who seek the services of Auto Credit Express are), you’ll be hard pressed to find a zero down offer.

Bad Credit Car Loans with No Money Down

Consumers with bad credit would be wise to act as if the term “zero down car loans” doesn’t exist. This is because virtually every subprime lender has a down payment requirement these days. So, if you’re trying to finance a car with bad credit, expect to be asked to provide a down payment.

Subprime lenders are those who are willing to approve those with damaged credit. Yet, they still have qualifications that must be met and one of those is often a down payment requirement.

The subprime standard down payment requirement is 10% of the car’s price or $1,000, whichever is less. Your down payment can be cash or trade-in equity, or any combination of those two.

Here at Auto Credit Express we know this because we have been helping borrowers with bad credit find auto financing for over two decades. This has given us unique insight into why these lenders operate the way they do.

The reasons they typically require credit-challenged borrowers to have a down payment are straightforward. Lenders see a down payment as a way to increase the chances of you making regular and timely loan payments.

Think of it this way: making a down payment is putting your own money on the line. It’d be much easier to walk away from a loan if you didn’t have any money invested in the vehicle. But you’d surely be less likely to do so if you’ve put your own money into the car.

A Down Payment is Your Friend

A down payment shouldn’t be seen as an obstacle to your auto loan. Rather, it should be viewed as something that really works to your advantage if you are dealing with poor credit.

In fact, the larger the down payment you are able to make, the more you are helping yourself out. Here are some of the benefits:

  • It can help your chances of being approved because it lowers the loan to value ratio.
  • A down payment reduces the amount of your monthly payment because it lowers the loan principal.
  • Or it can make shortening the loan term possible so you can pay off the loan faster, which means paying much less in interest charges.
  • It reduces the total amount of interest charges you’ll pay on the loan.
  • A down payment reduces the likelihood of you being upside down, which makes it easier to trade out or refinance sooner and more easily.

As you can see, it works in your favor to provide a down payment.

If you are looking to get approved for an auto loan, you don’t have to worry about your credit holding you back when you use Auto Credit Express. We help car buyers connect to dealerships that are trained in special finance. You can get the car you need and a chance to rebuild your credit.

Get the process started today by completing our free and easy online application. The sooner you apply, the sooner you can get back on the road.

get a bad credit car loan

How to Get a Bad Credit Car Loan as a Freelancer

The internet is a busy and thriving place. And with so many active websites up and running, working as a freelancer has become a good career option for a lot of people. For those who like working from home, crave independence or want flexible hours, working as a freelance writer can be rewarding.

However, when it comes time to make a large purchase that requires financing, freelancers may find that getting approved for a loan is a little harder for the self-employed. This is especially true if you have a fluctuating income, no steady employer and bad credit.

Bad Credit Car Loan Income Requirements for Freelancers

If you’re a freelancer, anything that applies to other self-employed individuals also applies to you. So, just like anyone with bad credit who works for themselves, you will need to show a lender that you earn a regular, qualifying income.

Most car buyers with credit issues find that it’s easier to get financed through a special finance lender. These types of lenders are able to look at factors beyond your credit in order to approve you. They will want to know that you maintain a stable residence, have a regular job and earn a qualifying income.

Different lenders have different requirements, but most will need proof that you make at least $1,500-$1,800 (pre-tax) per month. Ideally, this income should be garnishable and dependable. So if you work for a single employer, you could simply produce your most recent paycheck stubs. But as a self-employed freelancer, additional documents will be needed in order to verify your income.

These may include:

  • Tax returns (1040 forms) from the past two years
  • A recent bank statement
  • Court letters that show any proof of supplemental income (disability, alimony, etc.)

Established freelancers have also reported that it’s useful to obtain letters of recommendation from long-time clients. These letters should show that you have relationships with employers who intend to continue using your services.

A growing number of freelancers are registering with websites like Upwork. Here, you can find jobs and collect payments all in one place. Upwork also allows for easy access to past invoices that can be printed and shown to potential lenders.

Additional Bad Credit Car Loan Requirements for the Self-Employed

In addition to a qualifying income, there are other requirements to consider. These include a valid driver’s license, a cell phone contract and proof of a stable residence. Why does it matter where you live and how long you’ve been there? It all comes down to risk vs. stability. Lenders will always look for evidence of stability in your life that makes you less of a loan risk. So, having a permanent address that you’ve maintained for at least a year can give you a better chance at an approval.

In order to verify your residence, you will need to provide a recent utility bill that is addressed to you. If, on the other hand, you’re the type of person who moves around a lot, you should be ready to offer a good explanation for your nomadic behavior. If you’ve frequently relocated for work-related reasons, a lender will probably understand.

Another way to handle frequent moves is to invest in a business address. For a low monthly fee, you can have a real street address and a place to receive your mail. Just type “business address” into your search engine and you will be presented with a number of options that are available for a variety of rates.

Auto Loan Assistance for Freelancers with Bad Credit

If you need a little help getting connected with a special finance lender, Auto Credit Express is ready to go to work for you. We can match you with a dealership in your area that works with the right kinds of lenders, and it won’t cost you anything.

Our service also comes with no obligations, so you have nothing to lose except another day without a car. Just fill out our simple and secure online loan request to get started today.

Eligible Vehicle Requirements Cars

Eligible Vehicle Requirements for Bad Credit Auto Loans

Here at Auto Credit Express, we help people understand and get through the poor credit car buying process. Our commitment to assisting consumers has helped us become a leader in the industry. And part of that commitment is answering the questions potential applicants have about the process.

Here is a question we recently received that many people could benefit from learning the answer to:

“I would like to know if there is somewhere that I can find the purchase rules, if any, such as age and mileage of eligible vehicles.”

There are certain purchase rules that bad credit lenders have when it comes to eligible vehicle requirements. However, such a comprehensive guide isn’t available on our website because different lenders have different requirements.

For those who do not know, Auto Credit Express helps people dealing with challenging credit situations find financing. We do this by connecting applicants to car dealerships that work with subprime lenders. These places specialize in helping people dealing with damaged credit get approved.

However, while subprime lenders are willing to approve borrowers with bad credit, each operates in a slightly different manner. They all will have their own set of rules, so there is no universal standard for purchase rules or eligible vehicle requirements.

Still, our experience in the industry has given us an inside look at what you can typically expect.

Eligible Vehicle Requirements for Bad Credit Car Loans

Subprime lenders do place some restrictions on the age, mileage and price of the vehicles they finance. Eligible vehicle requirements vary from one lender to the next, but they share some common traits:

  • Lenders have vehicle age limits – Typically, high-risk lenders will only finance new cars or used vehicles that are 10 years old or newer. Some even stick to seven years old or newer.
  • They will also have a vehicle mileage limit – Subprime lenders typically only finance cars that have less than 100,000 miles on the odometer, regardless of the model year.
  • Lenders typically set a minimum financed amount – Alongside the first two restrictions, lenders also typically set a minimum amount to be financed. While it will vary, the least amount you can finance is normally $5,000.

Lenders have their reasons for these vehicle guidelines. Mainly, they want borrowers to finance a vehicle that is dependable. Older cars with higher mileage are not as reliable as newer cars with fewer miles. They also have a greater chance of breaking down and/or needing expensive repairs. Things can go south in a hurry when a vehicle being financed breaks down.

The Bottom Line

Remember, each lender is going to have their own set of requirements. However, the requirements discussed above are what we’d typically expect. We know this because we have been helping people find bad credit auto loans for close to 20 years.

If you are dealing with imperfect credit and need to finance a car, you’re in the right place. Auto Credit Express can connect you to a local dealership that specializes in working with challenging credit situations.

Get started today by filling out our free, easy and secure online auto loan request.

seasonal employee, bad credit, car loan

Getting a Bad Credit Car Loan as a Seasonal Employee

Under the Patient Protection and Affordable Care Act (PPACA), a seasonal employee is defined as someone who works 120 days a year or less for an employer. Various types of seasonal workers might include restaurant staff members, lifeguards or theme park employees.

If you are a seasonal employee and have bad credit, getting approved for auto financing can be very challenging. In fact, your success will largely depend on your income and the stability of your employment.

Auto Loan Requirements for Seasonal Employees with Bad Credit

Normally, bad credit auto loan applicants are expected to meet minimum income requirements. This is because, while special finance lenders can work with buyers who have credit issues, they need to make sure that these buyers have the means to pay back the loan.

Usually, bad credit lenders require applicants to provide proof that they make at least $1,800 a month (pre-tax). Ideally, this income should come from a regular employer. And the longer the buyer has held the same job, the better their chances will be for approval.

This is why seasonal employment coupled with bad credit can make someone a tough sale for a lender. First, there is the issue of income. Typically, when making an approval decision, special finance lenders will only consider one income source. So, even if someone has two or three seasonal jobs, only the primary one will count.

This means that the car buyer will need to bring in a yearly income from one job that equals at least $21,600 (pre-tax). Of course, this is $1,800 times 12, or what they would earn annually if they met the minimum monthly requirement.

Second, the issue of job stability must be addressed. This is why a seasonal employee who needs a bad credit car loan will need to prove that their employment has been steady. In order to verify that they can count on their income, they’ll probably have to provide several years of tax returns. On top of that, they may also need to produce bank statements from these years.

Seasonal Employment and Unemployment Benefits

A lot of seasonal employees rely on income from unemployment benefits for several months out of the year. And while they make think that this income will count toward a minimum income requirement set by a lender, it won’t.

Income from unemployment benefits also won’t count toward a person’s debt to income (DTI) ratio or payment to income (PTI) ratio. So, even if an applicant is able to cover all of the yearly bills and expenses with a combination of wages and unemployment, they may still not qualify for a bad credit car loan. This is because only the earned income will be considered when these ratios are calculated.

Alternative Lending Options for Seasonal Employees

If a seasonal employee with bad credit earns enough income to qualify for a loan, but still has job stability issues, a strong cosigner can help. This cosigner would need to be someone with good credit and a stable, non-seasonal job. Of course, this is an arrangement that should be entered into with caution. After all, a great deal of risk comes with the cosigner role.

Finally, if there is no other option available, a credit-challenged person with seasonal employment may be able to finance a car through a buy-here-pay-here (BHPH) dealership. These types of dealers handle their financing in-house. This means that they don’t use third party lenders, and they normally don’t run credit checks on buyers.

As long as someone is able to prove that they can make either weekly or bi-weekly payments, they should be able to get approved at a BHPH lot. However, BHPH buyers should be warned that they will probably face a high interest rate on their loan. Also, if possible, they should find a BHPH dealer that reports both loans and payments to the credit bureaus. This way, the buyer will have an opportunity to improve their credit by making all of their payments on time.

Financing Assistance for Tough Credit Situations

Even if you think there’s no way you can get auto financing, Auto Credit Express may be able to help. We can match you with a local dealership that can work with unique credit situations. So, even if you think that you have no options, you may be surprised.

To make it even easier, our service is free and comes with no obligations. Therefore, you really have nothing to lose. Go ahead and fill out our simple and secure auto loan request to get started today.

fixed income

Applying for a Bad Credit Car Loan on Disability with Fixed Income

Getting approved for a car loan becomes more difficult if you have bad credit, do not have a job, and your only income comes from benefits such as Social Security or disability. This past month, a consumer asked us about this particular matter:

“I want to apply but have no job, am disabled and on disability, so how can I apply with a fixed income of social security check.”

If this person has good or great credit, qualifying shouldn’t be a problem if they meet a lender’s requirements. However, if their credit is in bad shape, getting approved is going to be much tougher, and we can explain why.

Here at Auto Credit Express, we help people with credit issues locate auto financing, so we are going to assume that this person doesn’t have good credit. Keep this in mind as we break down how your ability to get approved for a car loan is affected by not having a job and only living on a fixed income.

Fixed Income and Bad Credit Car Loans

Subprime lenders—those who work with consumers with poor credit—are willing to review applicants who have a fixed income, but you still need to be able to fulfill all of the requirements.

To start, this means meeting the minimum monthly income requirement. Most subprime lenders typically require that you earn between $1,500-$2,000 a month (before taxes are taken out). You can use fixed sources of income, such as Social Security, to meet this requirement.

You will also have to meet other income-related requirements, which include varying debt to income (DTI) ratio and payment to income (PTI) ratio standards. Again, lenders will consider fixed sources of income when calculating these ratios.

While a fixed income will help meet these requirements, it becomes a problem thanks to another subprime lender limitation. They need at least a portion of your income to be garnishable, and Social Security benefits, and other tax-free fixed income sources, cannot be garnished.

In the event you fall behind or stop making payments on a loan (a situation that is more likely to happen with a bad credit loan), a lender must be able to garnish a portion of your income in order to cover their losses. Therefore, it’s a problem when somebody with bad credit doesn’t have any garnishable income.

When Social Security is Your Only Income Source

So, is it possible for someone with bad credit whose only source of income isn’t garnishable (like the person who asked the question) to be approved for a car loan? The answer is almost always going to be no. Unless…

  • You earn some kind of additional W2 or 1099 income that can be garnished. You don’t have to meet the income requirements with just this source. It can be combined with your fixed income to meet the lender’s requirements.
  • You have a cosigner with a garnishable source of income. If you have a cosigner with garnishable income, they must meet the lender’s income, DTI, and PTI ratio requirements on their own, as well.

If either of those are not an option, you could try a buy here pay here (BHPH) dealer. These dealerships finance in-house, so they typically do not care if your income comes solely from disability, Social Security, or other benefits.

If you do use a BHPH, try to make sure that you pick one that reports your loan and positive payments to the credit bureaus. This way, your car loan can help improve your credit and put you in a much better position the next time you need to finance a vehicle.

The Bottom Line

If you have bad credit and all of your income comes from non-garnishable benefits like Social Security, it can be very difficult to get approved for a car loan without the help of a cosigner. So, the car buyer who asked the question would greatly improve their chances of success if they lined one up before applying.

Speaking of improving your chances of getting approved for a bad credit car loan, Auto Credit Express wants to help you do just that. Our fast and free service connects consumers to dealerships that specialize in helping people in poor credit situations.

Don’t let your credit stop you from getting financed. Take the first step by filling out our car loan request form today.

saving for a down payment

Bad Credit Down Payment Requirements on a Car

Car buyers with bad credit are usually required to make a minimum down payment when financing a vehicle as a form of borrower participation.

Financing a Vehicle with Bad Credit

Your credit score is a way for lenders and creditors to evaluate your ability as a borrower. Lenders set their own standards for qualifying, and the majority of them aren’t willing to offer bad credit car loans.

Subprime lenders – those who do finance applicants with less than perfect credit – offset the risk bad credit represents with various requirements and vehicle eligibility rules. These include: a maximum and minimum on the amount you can finance, minimum income requirements, employment rules, maximum debt to income and payment to income ratio requirements, restrictions on age and mileage of vehicles, loan lengths, and more.

In addition, borrowers can typically expect a higher interest rate and a down payment requirement.

Down Payment Requirements on a Car with Bad Credit

As a minimum down payment on a bad credit car loan, subprime lenders generally want 10 percent of the vehicle’s selling price or $1,000. They’re willing to accept the lower amount of the two, and take both cash and trade-in equity.

Keep in mind that this is only what we’d typically expect, and some lenders may require more, while others may accept a lower amount. The down payment can also vary with the same lender depending on the structure of the loan.

Lenders appreciate when borrowers put their own money on the line, because it shows they’re serious about paying back the loan. Some dealers and lenders refer to down payments as “borrower participation,” and it makes sense why they do.

When you have your own money invested in a vehicle, it gives you a greater sense of ownership. In that sense, lenders see a down payment as an investment that makes you more likely to successfully complete your loan.

In addition to helping you get approved, putting money down comes with other benefits. With a down payment, you should be able to save money down the road. When you borrow less, it lowers the interest charges you end up paying. This can make a big difference with the higher interest rates associated with bad credit loans.

Finding a Car Loan with Bad Credit

If you’re dealing with less than perfect credit and need a car loan, expect a down payment of around 10 percent or $1,000. Preparing and saving up beforehand can help you avoid problems down the road. Considering it’s tax season, you may be able to help yourself by using all or part of your tax refund.

Got your down payment but don’t know what you need to do next to get financed? Auto Credit Express matches consumers with local dealerships that are capable of handling challenging credit situations. Take the first step by filling out our free and secure auto loan request form right now.