If you have bad credit and are looking for a low down payment used car loan, you may be wondering if it’s possible. While some lenders may offer a low down payment and no credit check, it can be very difficult trying to find one. Plus, if you have little to no credit, you may have to choose between a no credit check or a low down payment loan.
If You Want a Low Down Payment Used Car Loan
One of the best ways to improve your credit score over time is by taking out a subprime auto loan. Although subprime lenders run a credit check, they’re used to working with bad credit car buyers, and your credit score is just one factor they consider when deciding what you’re approved for. In addition to your credit score, subprime lenders look at these four things:
- Proof of income – A recent computer-generated pay stub that shows your year-to-date income. Most lenders require a minimum monthly income level.
- Proof of residence – A utility bill in your name at the address listed on the application.
- Proof of identity – A valid driver’s license showing the address listed on the application.
- Proof of a working phone – A recent phone bill, either a landline or contract cell phone. Prepaid plans are typically not acceptable.
With subprime lenders, you can’t avoid the down payment requirement. But, that doesn’t mean you have to come up with a huge down payment. Subprime lenders usually require a minimum of $1,000 or 10 percent of the vehicle’s selling price, whichever is less. Because these lenders typically don’t finance less than $5,000, if you finance a used car for $5,000, you only need $500 to fulfill the down payment requirement. Also, if you have a trade-in with equity, you can use it toward the down payment, or use a mix of trade-in equity and cash.
If You Want a No Credit Check Used Car Loan
If your main concern is a very low credit score and you need a car loan, your best place to look for financing is a buy here pay here (BHPH) lot. BHPH dealerships aren’t like traditional or subprime lenders – they offer in-house auto loans and don’t use third-party lenders. This means you can sign and drive all in one place, making the car buying process quick and easy.
What makes BHPH dealers attractive to car buyers is the fact that they typically don’t run credit checks. So, you don’t necessarily need a good credit score – or any at all – to get approved for financing. The downside is that most BHPH dealerships don’t report loans or positive payments to the credit bureaus, so your credit won’t improve with one of these loans. At the same time, these dealers usually report missed payments, which can bring your credit score down even further.
Just like subprime lenders, a BHPH dealership may need the same type of documents to help determine the vehicle you qualify for, such as proof of income, residency, and identity. Once you show the dealer the required documents, they choose which cars you qualify for, and at what interest rate. Keep in mind that you’re required to make a down payment, which may have to cover the cost of the vehicle – and, depending on the car, it can be much higher than the down payment you would typically need with a subprime lender.
Looking for a Dealer to Work With?
It isn’t easy finding a lender who can offer no credit check and low down payment car loans. But if you have bad credit, one of the best options is to find a subprime lender. Even though they run a credit check, you don’t need a hefty down payment, and you can improve your credit over time. If you’re ready to find a dealership that has a subprime lender, but aren’t sure where to start, we’ve got you covered.
At Drivers Lane, we specialize in connecting car buyers to the right dealer, and want to help consumers just like you. We can match you with a dealership in your area that works with unique credit situations. Our service is free and comes with no obligations, so you have nothing to lose! Fill out our simple and secure auto loan request form to get started today.