With bad credit, getting new credit can be difficult. However, if you are in need of a car loan, you have at least three types of lenders to consider, and we want to help you find them.
Auto loans for bad credit
Getting a car loan with bad credit doesn’t have to be difficult. While you might be a little more limited in your choice of lenders, you might not be as limited as you think.
Easiest option: BHPH dealer
Arguably, the easiest way to get a bad credit car loan is to go to a dealership, Buy Here, Pay Here (BHPH). It’s easier as a borrower with bad credit because these dealers often skip the credit check as they perform dual roles of dealer and lender. They don’t need to rely on the approval of a third-party lender, so they may disregard your credit history during the qualifying process.
BHPH dealers have a few drawbacks to consider, however. You may be facing a high interest rate because skipping the credit check means taking more risk for the dealership. To compensate for this, they tend to charge more on their loans. Additionally, expect a down payment requirement, which could be as much as 20% of the vehicle’s selling price.
Second easiest option: Special financing dealer
The second easiest way to get a bad credit auto loan might be to go to a special finance dealership. These dealerships are registered with subprime lenders who specialize in assisting borrowers facing credit problems. This can include bankruptcy, habitual bad credit, no credit, or other situations that create a lower credit score.
These lenders check your credit score, so this is a factor in your eligibility. However, subprime lenders also take into consideration your work history, income, debt-to-income ratio, your down payment amount, etc. They are equipped to help borrowers with many unique credit situations, so your situation carries a lot of weight in your eligibility.
The trickiest part of special financing is finding a dealer who has signed up with these lenders – most dealerships aren’t clear on who their lending partners are.
Third easiest option: credit union
A credit union reports to a traditional lender because it is a direct lender and may require a good credit rating. However, credit unions tend to be more lenient with credit score requirements than banks and auto manufacturer captive lenders. If you are a long-time member of a credit union, you may have a decent chance of qualifying for a car loan with them.
If you are a new borrower or a borrower with some minor breaches on your credit reports, then a credit union may be a good avenue to explore. You can also increase your chances of qualifying by having a co-signer. However, you may not be able to qualify if you have serious negative scores on your credit report.
Are you looking for a bad credit auto loan?
One of the hardest steps in getting a bad credit car loan is finding the right lender. If you want to skip the search, start with us at Auto Express Credit. We have created a network from coast to coast of specialized finance dealers. Fill out our free auto loan application form and we’ll immediately get to work finding a dealership in your area, with no fees or obligations. Get started on the road to auto credit today!