A bad credit auto loan is a car loan designed to help people that don't qualify for a traditional loan from a dealership, bank, or credit union. Bad credit auto loans go by many names, including second chance car loans, bad credit car loans, subprime loans, and bad credit auto financing, to name a few. One of these loans could be just what you're looking for if you need a vehicle and are struggling with credit issues.

What Makes a Bad Credit Car Loan Different?

What's a Bad Credit Auto Loan?The thing that makes a bad credit car loan different from a traditional loan is that qualifying for financing with bad credit takes factors in addition to your credit into account. This isn't the case with traditional loans. With a traditional auto loan, if you don't have good credit, you don't get a loan, period.

The lenders that offer bad credit loans – called subprime lenders – know that things happen in life, and that people with imperfect credit need vehicles, too. That's why they rely on factors such as your ability, stability, and willingness to pay and successfully complete a car loan.

Let's take a look at what these three things mean:

  1. Ability – Your ability to qualify for an auto loan is based on your income and employment. Specifically, do you have enough available income to pay for a car loan and insurance?
  2. Stability – This is based on how long you've lived in one area, and how stable your income and employment history have been.
  3. Willingness to pay – How willing are you to pay your loan, and invest in your own success? Lenders look at your credit history to determine how you’ve paid your loans in the past, and typically also require a down payment. Bad credit lenders generally ask for a down payment of $1,000 or 10% of the vehicle's selling price, whichever is less.

In order to provide the lender with proof that you meet the requirements for a loan, you have to bring documentation with you to the dealer. Bring in:

  • Proof of income – A current computer-generated paycheck stub showing year-to-date taxable income from a single source. Bad credit lenders usually require a minimum monthly income of somewhere around $1,500 to $2,000 a month before taxes.
  • Proof of residence – A current utility bill in your name at the address listed on the credit application. This simply confirms to the lender that you actually live at the address you list on your loan application.
  • Proof of a working telephone – A bill for a landline or contract cell phone in your name (prepaid phones don't count). This is a strange requirement, but bad credit lenders want to make sure they can contact you if they ever need to.
  • A valid driver's license – Subprime lenders usually require this as a way to confirm your identity. Valid means your license can't be expired or suspended.
  • Personal references – A list of five to eight personal references with names, addresses, and home and work phone numbers is also usually needed. A lender may or may not contact your references as another way to verify information.

When you get financed with bad credit, not only do you get a car, you get an opportunity to improve your credit score. Each on-time payment you make on the loan adds to you payment and credit history, which helps to raise your credit score over time.

How Do I Get a Bad Credit Car Loan?

As mentioned, the best way to get a bad credit auto loan is to work with a subprime lender. These lenders only work through special finance dealerships, and you can't sit down with them face to face. Instead, the dealer’s finance manager works with the lender on your behalf.

These lenders can be difficult to find on your own because dealerships that use them don't always advertise that they do. At Auto Credit Express, we work with a nationwide network of special finance dealers that are signed up with the lenders that offer bad credit car loans.

Let us take the hassle out of finding a dealership to work with. All you have to do is fill out our easy auto loan request form, and we'll begin the process of matching you with a local dealer. Don't hesitate any longer – get started right now!