What loan terms can I expect with a bad credit auto loan?


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When you finance a vehicle, the loan terms largely depend on your personal situation, the car, your credit, and what you bring. But if you want a basic idea of ​​what other sub-prime borrowers qualify for, we’ve got a few answers.

Average auto credit conditions for bad credit

Here has Auto Express Credit, we have created a dealer network across the country and are working to match borrowers who need bad credit financing at these locations for free.

We surveyed our dealers who are registered with subprime lenders to get a better idea of ​​the loan terms borrowers on credit qualify for.

According to the dealers we interviewed, here are the average loan terms for a subprime auto loan:

  • Average interest rate: 13.16%
  • Average amount financed: $ 23,842
  • Average deposit: $ 2,066

Keep in mind that these are only averages and not a prediction of what you will qualify for. Your personal circumstances, income, and subprime lender determine what you can get, but these loan terms reflect what many bad credit borrowers get.

To dive into those averages, one thing we’ve noticed is that subprime borrowers have had lower interest rates since the start of the coronavirus pandemic. Pre-coronavirus, our dealers have said sub-prime borrowers have an average interest rate of around 15%. This year alone, we’ve seen sub-prime borrowers get a 2% cut in average interest rates, which is great news.

The average down payment for a subprime car loan also declined, as pre-COVID borrowers had an average down payment of around $ 3,250.

Now that you have an idea of ​​what to expect from a subprime loan and what other borrowers can claim, you can begin the car buying process!

Basics of subprime auto loans

Subprime lenders work with borrowers who have less than perfect credit. These are third party lenders who are registered with special finance dealers. To be eligible, you must prove that you have the ability, stability and willingness to pay for a vehicle. This roughly translates into having an eligible income, a stable life situation, and a down payment to get your hands on a subprime auto loan.

With bad credit, generally considered a credit score of less than around 660, most traditional lenders can deny you auto financing. Your credit score gives a glimpse of how you’ve handled credit in the past, so a bad score can give the impression that you may not be able to pay off the loan very well.

However, there are many reasons why a person can have a less than perfect credit score, and subprime lenders understand this. They review your credit reports as a whole and work out a subprime car loan tailored to your personal situation if you qualify.

Common requirements of a subprime auto loan

Each lender you talk to is likely to have a different list of requirements that you must meet to get approved for a car loan. However, most tend to require similar things.

Here are some common requirements for a subprime car loan:

  • Returned – Most subprime lenders charge around $ 1,500 to $ 2,500 in gross minimum monthly income from a single source.
  • Work history – Auto lenders generally require that you have been in the same job for at least six months to a year.
  • Residence – Lenders seek stability in work and residence. Subprime lenders generally require that you have lived in the same residence for at least a year.
  • Advance payment – Most bad credit auto lenders charge at least $ 1,000 or 10% of the vehicle’s selling price. The deposit can be in cash or in exchange capital.
  • Work phone – Subprime lenders require that you have a working cell phone or landline in your name.
  • Personal references – If you meet the other conditions, subprime lenders typically require a list of five to eight personal references with their contact details.
  • Driving license – To take a test drive or drive a car off the lot, you must have a valid driver’s license with your current address. This means that it cannot be suspended, revoked or expired.

If you can meet these requirements, you could be on your way to a subprime auto loan. Keep in mind that everyone’s situation is different, and if you have a unique credit situation (such as a past bankruptcy), the lender may require more items.

The first step to your next car loan

When you know what to expect, you can drive to a dealership with confidence, prepared, and ready to finance your next vehicle. Finding a dealership with the right resources is the next step in securing a subprime car loan.

Auto Express Credit will look for a dealer in your area so you can get better credit. To be matched with a dealership near you who is registered with subprime lenders, complete our free auto loan application form. It’s completely online, secure and there is never a requirement to buy anything.

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