Oh snap. Your car just died, you don't have any money saved up, and you know your credit's in bad shape. What do you do now? If you've ever been, or currently are, in this situation, you know exactly what we're talking about. So, first off, don't panic. You're going to get through this, and you're going to do it with a little guidance from Drivers Lane.

The Difference Between Car Loans and Bad Credit Car Loans

Getting a car loan when you have bad credit is doable, but you need to understand that you have to meet a stricter set of standards than borrowers whose credit is top notch. Is this frustrating? Yes, but it's far from impossible.

Let's first take a look at the difference between getting an auto loan with good credit and getting a car loan with bad credit. The processes are similar, but there are some key differences:

  • Bad Credit Car Loan QualificationsBuying a Vehicle with Good Credit – This process starts with car choice. After that, you move on to price negotiation, possibly even throwing in a trade-in. Then, you sign your contract and take delivery of your vehicle. With good credit, it's also possible that you may have a pre-approval from your bank or credit union beforehand. Let the dealership know if this is the case.
  • Buying a Car with Bad Credit – The process is almost flipped when compared to the good credit process of car buying. First, pre-approval isn't typically an option when your credit is suffering. Instead, you begin your process with the dealer, who presents your loan application to one or more lenders. Upon approval, the dealership gets a "payment call" from the lender, along with any additional stipulations. Then, the dealer's special finance manager goes over a list of in-stock vehicles you qualify for that you can test drive. Finally, you choose your car, provide supporting documents to prove the information in your application, sign the paperwork, and take delivery of your vehicle.

Qualifying for a Bad Credit Car Loan

If you notice one point about getting a car loan with bad credit, we didn't mention negotiating the vehicle price. This is more difficult with poor credit, but you can certainly still use a trade-in with equity to help with a down payment and reduce the loan amount.

One thing we did mention, however, is supporting documents. Borrowers with good or excellent credit don't typically have to provide these (they do have to prove their identity with a valid driver's license, though). In order to qualify for a bad credit auto loan, you do need to meet a few more lender requirements in addition to proving your identity.

Bad Credit Car Loan Qualifications

These three things show a lender that you have the ability, stability, and willingness to take out and complete a car loan:

  • Income – Lenders need you to prove that you make a certain amount of income, with their minimum typically falling between $1,500 and $2,000 a month before taxes from a single job. Provide your most recent computer-generated check stub showing year-to-date income to serve as proof of income.
  • Residency – Lenders want to see you live where you say you do. Provide a current utility bill in your name at the address listed on your credit application (make sure the bill is paid, or at least doesn't show a past due balance).
  • Down Payment – Using a down payment when you get a bad credit auto loan is one of the smartest things you can do. Even though the amount necessary varies by lender, the more you can come up with, the better off you are in the long run. A down payment means you aren't borrowing as much, and also helps reduce the interest charges you pay over the course of your loan.

One more thing: your credit plays a big part in getting a car loan, and just because it's possible to get bad credit auto loans, doesn't mean that everyone can always be approved. It's a good idea to know where your credit stands, and to research the kinds of rates and terms that are available to people in similar credit situations.

Knowing Where to Find a Dealer

Finding a dealership in your area that works with subprime lenders can sometimes be challenging. But it doesn't have to be when you team up with Drivers Lane. We work with a nationwide network of special finance dealers that have lenders that can get you the financing you need. To find a dealership near you, simply fill out our easy car loan request form, and we'll get to work for you!