If you’ve never financed a vehicle with the help of a subprime lender, you might be wondering. Auto Express Credit has answers! We receive questions about subprime auto loans daily and have common solutions to help you navigate the subprime finance space.
1. Can I get a subprime car loan with very bad credit?
What is considered “really” bad credit is subjective and the answer may vary depending on the lender you are working with. Typically, bad credit is considered a credit score below 660, and “real” bad credit can be considered a score below 500. However, what is usually the most important for a subprime lender is what created the bad credit score in the first place.
For example, if you have bad credit after being recently released from bankruptcy, it will likely be considered situational bad credit. Situational bad credit is defined as bad credit resulting from one or more life events that damage your credit reports. Many subprime lenders understand this and can help in these situations. However, if you have bad credit because you missed too many payments on your loans in the past, it can be considered habitual bad credit, which can be more difficult to overcome.
The main concern of an auto lender is your ability to repay the loan. Your personal circumstances and what is reported on your credit reports are unique to you, and subprime lenders are equipped to work with many different credit circumstances if you can prove that you can afford the loan on time.
2. Do I need a deposit?
Yes, you can expect a down payment requirement if you are applying for a subprime car loan. Almost all subprime lenders have this requirement; it’s usually at least $ 1,000 or 10% of the vehicle’s selling price (sometimes whichever is less).
A down payment can be made in cash, trade-in capital or both. The sale price of the car you want to finance may also affect your down payment requirement. If you want a lower down payment, you may need to consider a more affordable car.
3. Do I need a co-signer for a subprime car loan?
Having a co-signer is not a general requirement to qualify for a subprime auto loan. In fact, subprime auto loans are for borrowers with credit problems, so a co-signer may not be necessary at all. The main goal of a co-signer is to “lend” you their good credit rating, but subprime lenders are not as strict with credit score requirements as other traditional lenders.
Generally, if you can meet the other criteria for a subprime car loan, you may not need a co-signer to be considered for subprime financing.
4. Can I buy a new or used car?
Risk lenders are signed with special financing dealersTherefore, new and used cars are generally available options for subprime borrowers. Your income and current expenses determine how much loan you are eligible for. In some cases, if you have the income to afford a new vehicle and qualify for a subprime car loan, it can happen.
Usually, borrowers with bad credit have an easier time getting approved for a used car loan because the selling prices of used vehicles tend to be lower. Many new vehicles require a higher loan amount, so if you have your heart set on a brand new set of wheels, we recommend have a large deposit to increase your chances of getting approved.
5. How much income do I need to qualify?
Subprime lenders vary in their specific income requirements, but generally the key income requirement is around $ 1,500 to $ 2,500 minimum monthly income from a single source. Subprime lenders generally prefer borrowers with W-2 income, but some are also willing to approve borrowers with 1099 income.
Another thing associated with your income is your work history. Most subprime lenders require that you have been in your current job for about six months to a year. Auto lenders need proof of how much you bring back each month and want to be sure that the income will stay constant for the life of the loan. The longer you have been in your current job or in the same field, the more likely you are to meet the demands of your work history and income.
6. Can I refinance a subprime car loan?
Yes, it is possible to refinance a subprime auto loan. Many bad credit borrowers want to refinance their car after a period of time, once they see an improvement in their credit score, as this may provide the opportunity to lower your interest rate and / or monthly payment.
Refinance lenders have their own eligibility criteria for vehicle refinancing, such as mileage, age, and age of your loan. For more information on typical refinancing needs, you can read about them here.
7. What interest rates can I expect?
It’s a very frequently asked question that we get here at Auto Credit Express, but there’s no easy answer. We are not a lender, however, we can tell you that borrowers who use our services receive an average interest rate of around 13%, according to our dealer network.
The type of vehicle you finance, your credit rating and reports, the down payment amount, and the loan amount are all within the scope of the interest rate you may qualify for. There is no one exact number that covers everyone. However, if your credit rating is bad, it may be possible to qualify for an interest rate in the range of 5-20% on an auto loan. Here are some ways to increase your chances of getting a lower interest rate on a subprime car loan:
- Have a co-signer
- Have a large down payment or trade with equity
- Choose a newer vehicle
8. How do I find risky lenders?
Finding a subprime lender starts with finding a dealer who has signed up with them. Dealers almost always have lending partners, but it is not always clear which ones are signed with subprime lenders.
This is something that we want to help Auto Express Credit. We know how difficult it can be to find loan resources when your credit score is less than perfect, which is why we have created our nationwide network of special finance dealers. We’ve been connecting borrowers with dealers in their area for 20 years, and we’re also eager to help.
To begin the process of finding a reseller in your area, complete our auto loan application form. It’s completely free, no obligation, and we’ll get to work.