Before submitting an application for a bad credit auto loan, there are a few things you need to know. Getting approved for a car loan with imperfect credit doesn't have to be hard. When preparing to apply for a bad credit auto loan, taking a few steps ahead of time can help the process go smoothly.

Tip 1: Know Your Credit Scores and What's on Your Credit Reports

bad credit, auto loan

You should have a look at your credit score before applying. You can access yours a number of ways, including directly from the three national credit bureaus, for a small fee. This allows you to know exactly where you stand at the moment.

Most bad credit lenders deal with credit scores in the 500-620 range. At least, the subprime lenders who work indirectly through dealerships stick to approximately that range. Keep in mind that this is not a hard and fast rule.

It can also help to take a look at your credit reports. This is because auto lenders will closely examine how long and how well you used credit in the past, especially with any car loans.

You can request copies of your credit reports directly from the major credit bureaus at You are entitled to a free copy from each bureau every 12 months. Look them over closely for errors you can dispute and for areas in which you can improve before applying for your car loan.

Tip 2: Get Your Budget in Order

It's very helpful to budget and know what you can afford before applying or even visiting a dealership. If you don't have a budget, there is no time like the present to start one.

Sit down and figure out exactly how much you bring in every month and exactly how much you are spending each month. That means accounting for all expenses, including your bills (rent, mortgage, credit card payments, utilities, etc.), groceries/food, gas, clothing, what you are putting into savings, etc. You may even be able to identify areas where you can either reduce or eliminate certain expenses.

What's left over is the income you have available for your car loan. But be careful. This is not the amount you should spend on your car payment. You shouldn't leave yourself with no wiggle room in your budget, plus you need to account for the other expenses that come with car ownership. These include insurance, fuel, maintenance, repairs and more.

Still, figuring out your budget should help you identify a car payment you can comfortably afford. From there, you can start to identify some cars in your price range that you may be able to target.

Tip 3: Know the Requirements

Bad credit lenders will have their own set of requirements, but we can let you in on what those typically are. Applicants have to be:

  • 18 years of age or older.
  • A current resident and legal citizen of the United States or Canada.
  • Employed or have the fixed, garnishable, income to meet the income requirements.
  • Able to prove they earn a minimum monthly income of $1,800 before taxes are taken out.

Again, these are the typical requirements, but different lenders can have different standards.

Tip 4: Prepare a Down Payment

Almost all subprime lenders will require a down payment. The standard down payment amount is 10% of the car's selling price or $1,000, whichever is lower. You should note that even if you aren't required to make one, it is still in YOUR best interest to have a down payment.

A down payment on a bad credit auto loan provides you with a lot of benefits. This is because it reduces the amount you need to borrow, which:

  • Improves your chances of getting approved.
  • Reduces the amount of interest you end up paying.
  • Can make it possible to shorten the loan term and greatly reduce the amount of interest you pay.

Keep in mind that the interest rate you are able to qualify for often comes down to your credit score. This means bad credit auto loans have higher interest rates attached to them. Therefore, reducing the amount of interest you pay - with either a down payment or a shorter loan term - can make a big difference.

A Final Tip

Taking the right steps and doing a little prep work can allow the process to continue without a hitch. However, we should also mention that in order to get approved for a bad credit auto loan, you need to be working with the right dealership.

Most lenders cannot work with people who have damaged credit. Instead, the better path is finding a dealership with subprime lending connections. These dealers specialize in helping applicants with bad credit get approved.

Drivers Lane can help you find one of these dealerships in your local area. You may even be able to purchase your car with little or no money down.

Our service is free and we work fast, so get started right now by filling out our simple auto loan request.