How to Get a Used Car Loan With Bad Credit

You can get a car loan with poor credit.

Getting a used car loan can prove difficult with bad credit, but it can be done. Car loans for people with bad credit often result in a high interest rate and/or minimal room for negotiations. Review all of your loan options and explore all financing methods to get a used car loan with bad credit.

Instructions

Local lenders

1. Review your credit report to determine how damaged your credit is. Determine if you have any revolving credit, like credit cards or a mortgage, and make sure the information is accurate. Revolving credit in good standing is favorable to lenders when you're in good standing. Inspect your credit report for incorrect history information and fix any errors with the major credit bureaus before proceeding.

2. Apply for a loan with a local bank. Use a bank that you have an account with or another in your area. Call or stop in to apply for a pre-approval. Give all of your information: name, address, phone number, Social Security number, date of birth, annual income, employment information and the approximate time that you've been at your job and address.

3. Wait for your approval; the process might be immediate or take several days. Review your pre-approval terms before shopping if you're approved or find out the reason for the bank's decision to decline. Reasons that include a low credit score, insufficient income or extreme negative history suggest that you'll likely have to use a subprime lender.

Online lenders

1. Apply with a subprime lender -- a lender who extends a loan with higher rates and stricter vehicle requirements to high-risk buyers. Find one by searching the Internet for "bad credit auto loans" or "subprime auto loans." Research subprime lenders with the Better Business Bureau's website (see resources) before you apply.

2. Apply online for a pre-approval using the same information you supplied at your local lender. Wait for your pre-approval, which usually warrants a phone call and a review of descriptive paperwork that lists all terms and requirements.

3. Read over your requirements completely before shopping. Subprime lending can have tricky requirements that you must follow to get your loan. You might be restricted to a dollar amount in addition to vehicle mileage.

Dealer financing

1. Contact or stop into car dealers in your area. Ask if the dealer handles bad credit loans; you'll find that many do. Expect to make an appointment if you call or to fill out a credit application upon arrival before viewing the dealer's inventory.

2. Wait for your dealer's response. Dealers submit loans through Internet-based banking systems, so the approvals are often instant or can take up to several hours.

3. Find out what your vehicle requirements and restrictions are, if approved. You might find you have to put an exceptional amount of money down to obtain your loan.

Lot finance

1. Visit a "buy-here, pay-here" lot. If all other avenues fail, this type of dealer can extend you a loan without checking your credit.

2. Expect to put a decent amount for money down---usually in excess of one to several thousand dollars is necessary to buy a car. Dealer-finance lots often list payments and down payment information on each vehicle window.

3. Find out from the dealer how much you have to put down and how often you have to pay. Pay periods at a "buy-here, pay-here" lot usually are required on a weekly basis.

Tips & Warnings

• If you can't get an approval and don't want to shop at a "buy-here, pay-here" lot, try to find a cosigner. A cosigner makes it possible for you to obtain a low-interest loan from competitive lenders.

• Do not finance a vehicle with a payment you cannot afford. Keep shopping; do not make a desperate decision.

References

• Edmunds: Auto Finance Tips; Tips for Subprime Borrowers

Resources

• AnnualCreditReport
• Better Business Bureau