The Ultimate Guide to Finding a Bad Credit Loan Online (2024 Edition)
Where to find, what to expect, and how to get approved for a bad credit car loan online in 2024.
Buying a car can be a very frustrating experience; it can be even more frustrating if you’re trying to get a car loan with bad credit. Bad credit is not discriminatory or biased; it can happen to anyone anytime. My helpful guide will tell you what to expect, how to find, and help get you approved for a bad credit car loan online.
Every vehicle shopper’s circumstance is unique, and planning your car-buying process will help you figure out what’s best for you and how to get there. Here’s how to go about getting a vehicle loan with bad credit.
Table of Contents
Bad Credit is an Obstacle to Overcome
Not paying back loans is not the only way to acquire bad credit history. Getting divorced, losing a job, or getting injured for a long time can also throw you into a bad credit rating very quickly if you want to be there or not.
Bad credit doesn’t mean you’re a terrible person or deserve to drive an unreliable vehicle. Many companies out there understand the situation you’re in and want to help you find a car you want and help you get it.
This section will show you how to find lenders that will provide car loans for people with bad credit, how you can increase your chances of being approved, and what to expect after you’ve been approved for a car loan.
Errors on your credit report will cause you to have a bad credit score; if you’re unaware of what’s been reported to your credit report, you may want to review it before applying for a car loan. If you do find errors on your credit report, cleaning them up will increase your credit score.
You have nothing to be ashamed of if you have a bad credit history or rating. There are millions of people in the world today with credit problems, and with how the economy is, the number is rising daily.
It may take a little time, but you can always turn a bad credit rating into a healthy, intense history. However, if the one thing you lack is time, several lenders are willing to help you, no matter how bad your credit rating is.
Special Finance or Sub-Prime Lending
In the finance world, sub-prime lending is also known as “special finance,” “non-prime,” “near-prime,” and “second-chance financing,” which means giving loans to individuals who may have difficulty in maintaining the repayment schedule of the requested loans.
Sub-prime loans are characterized by less favorable terms and higher interest rates to compensate for the borrower’s higher credit risk. Although these types of bad credit auto loans may be more expensive, they will allow someone with a bad credit rating and score to obtain a car loan and be on their way to re-establishing an excellent credit history.
Credit ratings a sub-prime borrower may have:
- Excessive debt to income: The individual’s known income is not enough to pay current responsibilities, living expenses, interest, and repayments of the money borrowed.
- Proven history of missed or late payments.
- Limited experience with debt, no track record to determine if the borrower will repay a loan. The lender automatically assumes the worse.
- Defaulted debt, failure to pay debts ultimately, charge-offs, and not fulfilling the borrower’s responsibility to pay back the debt.
- Bankruptcy, foreclosure, legal judgments (orders to pay), unpaid child support, etc.
What to Expect if You Have Bad Credit
Bad credit does not necessarily mean you will not be approved for a car loan. You may have to take a step back when financing your next vehicle. The goal is to do it right and as quickly and financially painlessly as possible.
You can fix your past bad credit history; it just takes time. Until then, you may have to fulfill specific requirements you wouldn’t have to if you had a good credit history.
Obstacles you may have to overcome:
- You may have to provide a larger down payment, 10% of the purchase price or more.
- You may have to pay a much higher interest rate than posted in a car dealer’s advertising.
- May only qualify for shorter finance terms.
- You may only qualify to borrow only a certain amount of money.
- You may not qualify for the exact car you want to buy, or the dealership you’re applying with will only have a small selection of vehicles for you to choose from, depending on your approval qualification.
- You may have to supply extra documentation such as proof of income (computer-generated paycheck stub with your name), proof of residence (phone bill, credit card statement, or utility bill with your name and current address), employment, and personal references.
How to Increase Your Chance of Approval for a Bad Credit Auto Loan
When applying for a bad credit auto loan, the lender will look for specific minimum requirements before approving an applicant. You don’t have to meet all of these requirements, but the more you meet before applying, the better your chance of being approved for a bad credit auto loan.
Tips to help increase your chances of approval:
- A minimum of $1,600.00 gross monthly income (Some lenders only require only $1,500.00). This is your monthly income before any taxes are deducted.
- Must at least be 18 years of age. A lender cannot enter into a contract with a minor by law.
- May not have any repossession within the past year unless they were included in a bankruptcy.
- Proof of residence. You live at your current home for at least six months to a year. The longer you’ve lived at your current residence, the better your chances of getting approved for a car loan. The lender may want a utility or phone bill with your name and address for proof. The old say ng in the car business is, “No phone – No Loan!”
- Proof of employment. You are working at your current job for at least six months to a year. The longer you’ve worked at your current employer, the better; working in the same industry may work also. This also shows the lender you’re stable.
- Keep your budgeted car payment under 20% of your total gross monthly income.
- A lender may require up to 7 personal references with addresses and phone numbers. Have these ready, so you won’t have to scramble to get them later in the process.
- Depending on how bad your past credit history is, you may or may not be required to put down 10% or more of the purchase price of the vehicle you want to finance.
- Get and review your credit report and score. Once you receive your reports, fix any errors and any critical mistakes. You should always know what’s been reported to your credit bureau and maintain any issues that may arise as soon as possible to keep your credit history clean and healthy.
- Pay down credit card and other loan balances under half the maximum allowable balance. This will n t only decrease your debt to income ratio but also raise your credit score.
Arrange Financing Before Picking Out a Car
Spending time researching, selecting, and negotiating a vehicle’s purchase price only to find out you can’t qualify for financing on the car is a horrible feeling.
Most people that have bad credit go about the car buying process backward. You can save time and frustration by applying for a bad credit auto loan before selecting a vehicle.
CAUTION – If you solely rely on a car dealer to arrange to finance your next new or used vehicle. You’re guaranteed to lose money!
If you’re aware, you have some bumps in your credit history, or you’ve never financed a vehicle before. It is best to apply for an auto loan first.
Once approved, you’ll know upfront the amount of money you can borrow, your interest rate, monthly payment, and the terms and conditions of the loan. Once you see this information, you can find a vehicle that fits within your pre-approved car loan criteria.
How to Get a Bad Credit Auto Loan Quote Online
All because you have bad credit or you don’t have any credit history at all doesn’t mean you don’t have many options when it comes to finding a bad credit car loan with a decent interest rate.
Bad credit online auto finance companies have massive auto lending networks to help people find a bad credit car loan, and the interest rates usually are pretty good.
These online companies allow you to submit your information securely and will supply you with free, no-obligation bad credit car loan quotes. Even if you don’t go with one of these online companies, they will give you an idea of the interest rate and amount of money you qualify to borrow.
Recommended Bad Credit Auto Loan Sites
MyAutoloan has one easy, secure loan application, and you will have up to 4 free loan offers competing for your business in minutes. Their system is free, fast, and easy.
Auto Credit Express: Submit your details on their secure site for a free car loan quote in 3 minutes. Once approved, choose your vehicle from their vast dealer network and finalize your purchase.
Finance the Minimum Amount Possible
Once approved for a bad credit auto finance loan, don’t get over-excited and start running up the balance. Adding extended warranties and over-priced dealer-added options are not helping your situation.
You can get extended auto warranties online, direct from the source. A car dealer will mark up a $600 warranty well over $2000. You don’t have to pay the ridiculous prices car dealers charge; online warranty companies even have payment plans.
Once approved for a bad credit auto loan, finance as little as possible to get you over the hump. Let’s say you get approved for a $20,000 bad credit auto loan and your interest rate is 18%, be smart and find a car that meets the exact requirements but only costs $10,000 or $12,000.
You may not get the actual car you want to drive right now, but you will be saving thousands of dollars in interest.
Interest Charges Over 60 Months
Vehicle price of $20,000 X 18% interest = $10,472.11
Vehicle price of $12,000 X 18% interest = $ 6,283.27
Difference of $4,188.84 or $69.81 a month
The key to rebuilding your credit is not the amount of money you finance; it’s how responsible you are paying it back. Instead of paying 18% on $20,000, find a car you can live with for a few years to get you over the hump.
The next time you buy a car, you’ll have proof of a well-paid car loan on your credit and be able to buy any vehicle you want and pay a much lower interest rate.
Your second option is after paying on a bad credit loan for six months to a year, and you may want to look into refinancing your car. Refinancing will not only lower your monthly payment, but it will also lower your interest rate and possibly save you hundreds, if not thousands of dollars.
How to Get Out of a High-Interest Auto Loan
I get many emails from individuals telling me that a dealer ripped them off by signing them to a much higher interest rate than what they qualified for. If you find a dealership that took advantage of you, you can do something about it: apply for an auto refinance loan.
My online auto refinance guide has saved readers thousands of dollars in high-interest charges. It only takes a few minutes to see how much money you can save by lowering your current car payment.
Related Car Dealer Finance Scams
Associated car dealer scams that unethical car dealers may attempt during the finance process of buying a car:
About the author
My name is Carlton Wolf, and I’ve been in the car business since 1994, both retail and wholesale. I created the Auto Cheat Sheet to better educate buyers about the deceptive sales practices used by many dealerships throughout the country. Please understand that not all car dealers are dishonest. However, you never know who you’ll be dealing with, though. I’m willing to share my knowledge and experience with anyone who listens. Keep in mind that I’m a car guy, not a writer.
