Types of Bad Credit Car Loans

car loan applicationIf you do not have an impressive credit history, you can still qualify for a bad credit car loan. Many banks, car lots and other lending institutions offer special plans for financing a vehicle that do not require a high credit score.

If your FICO credit score is below 640, then consider the following bad credit car loan options:

Manufacturer Loans

It may come as a surprise, but the same financial institutions that service the dealerships who turn down people with bad credit may also be able to make some exceptions. Certain auto manufacturers’ in house finance divisions can make concessions for customers with subprime credit ratings.

These loans typically only apply to new vehicles, but they can possess favorable terms such as low APR- even if the loan payment is stretched out over five years.

Many customers get to take advantage of these offers in order to secure a new car. In fact, Dodge reports that 20 percent of their customers are considered subprime. Here are some other manufacturers that offer special financing:

  • Dodge
  • Chrysler
  • Fiat
  • Hyundai
  • Mitsubishi

Local Lenders

If you have been denied a loan by a larger institution, seek out local banks, credit unions or other financial institutions to see if they can give you a break.

A local branch or affiliate of your bank may be more forgiving in terms of auto loans if you have a checking account with their bank and a credit history. Credit unions in particular encourage economic development of their area, meaning they have a vested interest in giving loans to members of their local community.

Dealer Financing

If the banks, the manufacturer and most everyone says no, you can usually find a dealership that will finally say “yes” if they offer Buy Here Pay Here auto loans.

These loans are provided directly by the business and are backed by another bank or financial institution. They often do not even require a credit check to begin the process. The dealer will review your income history and offer you a loan on vehicles that they think will qualify for your budget.

Be sure that you review the terms of any loans, as payment consequences for Buy Here Pay Here loans tend to be quite strict in order to protect the dealer from customers who may try to abandon their loans and keep the vehicle.

Special Finance Lenders

Outside of banks, manufacturers and dealers, some companies also offer loans that specialize in helping customers with subprime credit ratings. Many of these companies can be found online. They are usually dedicated to securing bad credit car loans for people that have no other option, or for those who do not want to encounter the hassles of auto loans like they have experienced in the past.

Other Strategies

Sometimes, proper tending and managing of your credit can improve a lender’s outlook on your history. Do yourself a favor and personally review your credit history to make sure that what a lender is telling you and what is actually on paper for your FICO score are the same thing. 

You may also discover errors in your score that can be addressed. Getting these false claims off of your credit report can sometimes cause it to become positively readjusted after 30 days. 

Other methods can involve closing out unused credit accounts, resolving debt for high APR lines of credit, or resolving discrepancies from creditors that may be inaccurate.

If you properly tend to your credit and seek out help from those who won’t turn down a subprime customer, then finding a loan for the vehicle you want can be a tangible reality.

Posted in: BKCarFinance News

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