When you have bad credit and need a car loan, you typically need to apply with a lender that specializes in bad credit auto loans: subprime lenders or buy here pay here (BHPH) dealers. The process of getting a car loan with less than perfect credit requires you to bring in additional documents to the dealership.
Documents to Bring to the Dealership
The first thing you need to be aware of is that subprime lenders use your credit score to qualify you, while most BHPH dealers don't. Regardless of your credit situation, both types of lenders need you to provide additional information and documents.
These lenders generally ask for these documents:
- ID and insurance – Your driver’s license and proof of insurance are needed to finance a vehicle, regardless of credit.
- Proof of income – Generally, subprime lenders require that you make at least $1,500 to $2,000 a month before taxes from one job. BHPH dealerships look for enough available income for an auto loan and insurance payments, and are OK with multiple sources of income. Both usually require a recent pay stub showing your year-to-date earnings to serve as proof of income.
- Proof of residence – Bring in a recent utility bill in your name showing the address listed on the application to prove that you live where you say you live. Bad credit lenders may also view people that have lived in the same area for an extended period of time more favorably, as this is seen as a sign of stability.
- Proof of a working phone – You also have to bring in a recent phone bill in your name to prove that you have a way to be contacted. This can be a landline or contract cell phone, but pre-paid phones typically aren't accepted.
- Personal references – Subprime lenders usually ask for a list of five to eight personal references with names, addresses, and phone numbers. These people may or may not be contacted to confirm information about you.
Auto Loan Down Payment Requirements
Both subprime lenders and buy here pay here dealerships typically require you to provide a down payment. Just how much money down you should save up depends on the lender you’re working with.
Subprime lenders typically ask for a minimum down payment of $1,000 or 10% of the car’s selling price, whichever is less. Buy here pay here dealers, on the other hand, have a more variable requirement. They usually base it on the vehicle you choose, so how much money down you need is variable.
You have three options when it comes to coming up with a down payment:
- Cash – You can pay cash.
- Trade-in equity – If you have a trade-in that has equity, you can apply it to the requirement.
- Combination – To put more money down, or if your trade-in equity isn’t enough to meet the minimum requirement, you can combine cash plus trade-in equity.
The Bottom Line
Having all your documents ready before you visit the dealership saves you time and moves the bad credit auto loan process along faster.
When you’re ready to find a dealer to work with, Drivers Lane is here to assist. We connect car buyers with poor credit to local special finance dealerships. This takes the hassle out of trying to locate one that can help you on your own. Get started right now by filling out our free and secure auto loan request form.