When you finance a vehicle, the loan terms largely depend on your personal circumstances, the car, your credit, and what you bring to the table. But if you want a basic idea of what other subprime borrowers are qualified for, we have some answers.
Average Bad Credit Car Loan Terms
Here has Auto Express CreditWe have created a nationwide network of dealerships and strive to connect borrowers in need of bad credit financing to these locations free of charge.
We surveyed our dealers who are registered with subprime lenders to get a better idea of the loan terms that borrowers with bad 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 down payment: $2,066
Remember 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 borrowers with bad credit get.
To dive into these averages, one thing we’ve noticed is that subprime borrowers have been enjoying lower interest rates since the coronavirus pandemic began. Pre-coronavirus, our dealers said subprime borrowers averaged around 15% interest. This year alone, we’ve seen subprime borrowers benefit from a 2% drop in their average interest rates, which is great news.
The average down payment for a subprime auto loan has also decreased, as pre-COVID borrowers had an average down payment of around $3,250.
Now that you have an idea of what you can expect from a subprime loan and what other borrowers are eligible for, you can start 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 financial dealers. To qualify, you must demonstrate that you have the ability, stability and willingness to pay for a vehicle. This basically translates to qualifying income, a stable living situation, and a down payment in hand to get your hands on a subprime auto loan.
With poor credit, generally considered a credit score below around 660, most traditional lenders can deny you car financing. Your credit score serves as a snapshot of how you’ve handled credit in the past, so a bad score can give the impression that you may not be able to repay the loan very well.
However, there are many reasons a person may 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 auto 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 you must meet to get approved for an auto loan. However, most tend to require similar things.
Here are some common requirements for a subprime auto loan:
- Income – Most subprime lenders require around $1,500 to $2,500 in minimum gross monthly income from a single source.
- Work history – Auto lenders generally require you to 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 one year.
- Deposit – Most car lenders with bad credit require at least $1,000 or 10% of the selling price of the vehicle. The down payment can be cash or clawback shares.
- Functional telephone – Subprime lenders require you to have a cell phone or landline under employment contract in your name.
- Personal references – If you meet the other requirements, subprime lenders typically require a list of five to eight personal references with contact information.
- 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 the right track for a subprime auto loan. Keep in mind that everyone’s situation is different, and if you have a unique credit situation (like past bankruptcy), the lender may require more.
The first step to your next car loan
When you know what to expect, you can walk into a dealership confidently prepared and ready to finance your next vehicle. Finding a dealership with the right resources is the next step to getting a subprime auto loan.
Auto Express Credit will seek out a dealer in your area so you can get better credit. To be matched with a dealership near you that is registered with subprime lenders, complete our free auto loan application form. It’s completely online, secure and there’s never any obligation to buy anything.