Posted on: Sep. 17, 2017 in Car Loans

If you need a new car and you have plenty of extra cash and a great credit score, you may find you have many options. However, for many of Americans, this is simply not the case. When your current vehicle dies and you need another, you probably don’t have the time to start saving or improving your credit before you get a new one. The good news is that there are auto loans available for consumers with bad credit, or a short and limited credit history.


Sub-prime auto loans can often be obtained by individuals who don’t meet the criteria for a regular auto loan. This doesn’t mean you’ll be able to buy any brand-new car off the lot though, so it’s important to understand what restrictions may apply.

The first thing you need to do is be honest with yourself about your financial and credit situation. Knowing what your credit score is will help you understand where you fall. There are several credit score models with different ranges, but generally a score of around 700 or better is considered good. Below that, your credit is likely classified as fair, bad, or poor.

Once you know your score, you need to take a look at your budget. Plan to put as much money down up front as possible. Aim for the greater of 10% of the purchase price or $1,000. If you can put more down, even better. You may also be able to trade your current vehicle in to help offset the purchase price. This lowers the amount of money you’ll need to borrow and lowers your monthly payment. A down payment makes it more likely that you’ll be approved for your loan.

You also need to make sure you can truly afford the car payments. You’ll need to consider your monthly gross income – that’s the amount you actually take home after taxes and deductions – compared to your current debts and obligations. Multiply that amount by 36% (so, .36) to get the maximum amount you can pay per month. Keep in mind that some lenders have a lower percentage. Next, add up your payments for things like rent or mortgage, utilities, and debt. If this number is lower than the 36% you calculated earlier, you may still have some room in your budget for a car payment.

Finally, you must factor in interest. You’ll need to pay interest on the amount of money you borrow and, for those who have a limited or low credit score, this amount can be higher than average. Because interest rates change over time, it’s hard to say what to budget for, but you might begin your planning based on 10%.

It can be overwhelming when you’re just getting started, but there is help available. If you’re ready for a new car but your credit is keeping you from getting approved, CreditYes can help with our bad credit auto loan program! We can match you with a dealership in your area that will be with you every step of the way. Our service is fast and free. Fill out our secure online application and get behind the wheel of your next car today!