The Beginner’s Guide to Applying for a Subprime Auto Loan


Monthly Car Payment Graphic

If you have limited or poor credit, you likely understand how much of a struggle it can be to apply (and be approved!) for a car loan. But did you know that there are loans specifically designed for people in your situation?

That’s right! Subprime auto loans are a great resource for individuals with poor credit. The key is understanding what you need to apply and how the loan itself differs from a traditional car loan.

What do I need before applying for a subprime auto loan?

The very first thing you need to do is find out what your credit score currently looks like. When applying for any kind of loan, credit score is one of the very first things a bank or auto loan leads professional will look at. Here’s the basic breakdown of credit scores and what they mean in terms of applying for an auto loan:

  • Nonprime – borrower has a credit score below 660
  • Subprime – borrower has a credit score between 500 and 600
  • Deep Subprime – borrower has a credit score below 500

In short, buyers with scores between 500 and 600, as well as those with scores between 300 and 500, are considered subprime. Deep subprime means an even lower credit score and likely a higher interest rate if a borrower is approved for a loan.

Next, you need to understand what you can feasibly afford. If you’re working with a very small budget, used car leads are going to be your best bet. Even if you’re taking into account the lower interest rates on some newer cars, a used car may ultimately be the best choice for your financial situation. Edmunds provides an excellent example if you’re curious. According to the online publication, if you received a loan for 11,500 at 19% interest for 60 months, your monthly payment would come out to approximately $299/month.

How does a subprime loan differ from a normal car loan?

When dealerships are generating auto leads, credit information is one of the top differentiating factors between a regular loan and a subprime loan. Ultimately, it’s the credit ranges discussed above that really make these two loans so different. In addition, the interest rates for a subprime loan are often higher than they would be for a normal auto loan. When generating auto leads, dealerships take all of this information into account. And if you’re credit score isn’t looking too great, it’s important to discuss the possibility of a subprime loan with your bank and your auto dealership.

Generating auto leads isn’t all about credit, it’s about what’s best for a dealership and its customers. If you don’t think a traditional auto loan is for you, make sure you look into subprime loans.

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