Bad Credit Auto Loans

Bad credit? No problem! Federal Auto Loan is here to help.

Federal Auto Loan
Your national connection source for bad credit auto loans and poor credit auto financing. was established upon common American principles – those of honesty, hard work, and a helping hand for one’s fellow man. And here at Federal Auto Loan, just like the freedom and liberty with which this country was founded on, we believe there to be certain truths in the world of financing that are self-evident: that at times, people go through financial hardship… and simply need a little help to get back on the right track; and that poor economic situations often take a serious toll on the financial prosperity of many individuals. It is for this very reason that, here at Federal Auto Loan, we have developed a consumer connection program designed specifically to lend people a “helping hand,” and assist them in getting connected with the bad credit auto loans they need. has established a nationwide network of bad credit auto loan dealers and lenders who specialize in helping people who have credit challenges. But more than this, we also do our best to provide our customers with extensive articles and information to aid in researching all aspects of their bad credit auto financing decision. Simply put, all financial decisions are important – and each one should be considered carefully – especially during times of financial difficulty.

With all the being said, you can never be too prepared for purchases as significant as a car… which, for most people, is one of the largest purchase decisions you’ll make over the course of your life. This is especially true if you have less than perfect credit. Fortunately, if you’re dealing with poor credit and need a vehicle, a subprime auto loan offers a way for you to get the financing you need. It also provides you with a chance to improve your credit (as long as you make your loan payments on time each month).

While many dealers aren’t willing or able to work with borrowers who have less-than-perfect credit, Federal Auto Loan can help you get connected with bad credit dealerships. We’re also here to help you make an informed decision when it comes to auto financing. By knowing what to expect and planning ahead of time, you can set yourself up for success with your bad credit auto loan.

So… if you are shopping around for a car loan, you’ve come to the right place. Federal Auto Loan can help you get bad credit auto financing for the new or used car you need.

What is a Bad Credit Auto Loan?

Bad credit auto loans aren’t like traditional car loans. There are a number of different requirements associated with bad credit auto financing that you’ll need to meet. And because not every car dealer has a special financing department, finding a subprime lender to work with is often a difficult task. Bad credit car loans are designed for buyers who have less-than-perfect or no credit. And they’re great for getting your credit back on track and getting you in the driver’s seat of a new or used car.

So where do you begin when it comes to bad credit auto financing?

Well, if you’re thinking about applying for a bad credit auto loan… the first step is to do a little research and prep work. You might already have an idea of the car you want to buy, but the Consumer Financial Protection Bureau (CFPB) recommends that you take a look at your financial circumstances before shopping for a vehicle. So to start, make sure you have these three bases covered:

  1. Request your credit reports and check your credit score.
    It is important to know that lenders and dealers take a range of factors into account when considering whether or not they will extend financing to a consumer with bad credit. For the most part, lenders and dealers make this decision based heavily on your credit score. And while it isn’t the sole factor, your credit score plays a key role in determining whether or not you will be approved.

    Because of this, you first need know where you stand with your credit. The CFPB advocates that you get hold of a copy of your credit report form the national reporting agencies to check for inaccuracies. It is important to know that you’re entitled to a free copy of your credit report once every 12 months from each of the three major credit bureaus: Equifax, Experian, and TransUnion. Check your credit reports over carefully and ensure that all the information is accurate. And dispute any errors with the appropriate credit bureau. Checking your credit score can help you when researching the interest rates car buyers (in similar situations to your own) are typically able to qualify for.

  2. Create a budget and determine what you can afford.
    By establishing a budget, you can estimate just how much you’ll be able to afford with a new or used car purchase. Just remember that there’s more to car buying than the price of the vehicle itself. You need to make sure that you can also afford insurance, fuel, tires, and repairs (as those needs arise). The last thing you want to happen when your credit is struggling is to overextend on a bad credit car loan.

    Also note that auto finance calculators are useful tools that are specifically designed to make estimating what you can afford easy. And, because it’s an online calculator, you can adjust the values of each variable to instantly see how the situation changes.

  3. Save some cash and prepare for a down payment.
    Making a down payment on a bad credit auto loan helps you out in many ways… not to mention that most subprime lenders and dealers require a down payment. Because of this, saving up for a down payment on your loan will help you get approved. It is also important to note that putting money down can also lower the amount of your loan. This leads to a lower monthly payment and reduced interest charges.

    The important thing to remember is that preparation is key when it comes to buying a new or used car—especially if you have less-than-perfect credit. If you need a vehicle and bad credit is holding you back… at Federal Auto Loan, we want you to understand that bad credit auto loans are designed to help car buyers just like you.

Typical Requirements for a Bad Credit Car Loan

Dealing with bad credit can feel crippling. But, when it comes to getting a car loan, a poor credit situation doesn’t have to disqualify you. There are steps and processes that can get you with the right lender and dealer that will work with your situation. So, don’t give up. Start the process by finding out the standards that most lenders and dealers require.

Some basic standards include:

  • Age – must be at least 18-years-old to apply
  • Residency – must be a current U.S. or Canadian citizen
  • License – must have a valid driver’s license

From there, dealers’ and lenders’ requirements will differ some. You will have to cover their specific standards when working with the dealer’s in-house, finance manager or with the outside, subprime lender. Some other typical requirements include:

  • Proof of residency – recent utility bill showing address in your name.
  • Proof of income – minimum pre-tax income of about $1,500 from one employer/contract.
  • Employment history – at least six months at your current job and a minimum of three years of employment with no major gaps.
  • Working phone – landline or cellphone in your name; pre-paid phone not accepted. Personal references – A number of references with contact information.

Be sure to have the necessary documents for these standards with you when you visit a dealership. The above list of requirements is only a starting point. From here, there are several other procedural steps that will need to be taken to get you on the road to a new, or new-to-you, car.

Here are some financial standards to be aware of:

  • Income ratios- your payment-to-income ratio can’t be more than 20 percent, and your debt-to-income ratio can’t be more than 50 percent.
  • Down payment – most lenders require a down payment of 10 percent of the vehicle’s selling price or $1,000.

Be sure to make these calculations before trying to work with a dealer or lender. It’s so important as you’re beginning to get your finances in order to improve your credit and overall financial situation, that you have a budget in place that clearly shows you what you can afford when it comes to a vehicle. Plus, a budget can help you stay on top of your finances and help you better prioritize your spending. Taking the steps to get a bad-credit, car loan can help you to not only get a car, but also begin restructuring your financial situation. It’s worth the effort.

The Differences: Situational Bad Credit vs. Habitual Bad Credit

Bad credit comes in all different shapes and sizes, but the primary differentiators are categorized by how you ended up with a poor credit score: circumstantially or by choices. Thus, the two primary categories for bad credit are situational and habitual. When trying to get a bad credit car loan, dealers and lenders will assess your credit predicament to determine which category fits you. That decision will dictate whether they will give you a loan or not. However, while one of these categories is definitely preferred, both still present the possibility of receiving a loan. Let’s dive into both a little deeper to give you an idea of where you land.

What is situational bad credit?

People who fall into situational bad credit ended up with a low credit score because of life circumstances that were beyond their control. They may have experienced situations like getting laid off, going through a financially taxing divorce, acquiring expensive medical bills personally or for a family member, losing a home and assets due to a natural disaster, etc. When a potential car buyer goes to a lender with these kinds of reasons for his or her bad credit, the lender is typically more willing to approve a loan.

What is habitual bad credit?

Typically, people who fall into the habitual-bad-credit category will have a history of not handling finances well. Their credit history could be filled with late payments, numerous repossessions, and/or more than one bankruptcy. Once one of the poor credit practices starts to recur, lenders see it as a habit. And, understandably, not a positive one. If you appear to be in a habit of not being responsible with finances, lenders are less likely to approve you for a loan because your financial history doesn’t lend itself to being trustworthy.

But, even in this kind of situation, there is still hope. You can begin shifting your credit situation a little at a time. Start making financial decisions that show that you’ve changed your financial habits. One way to do this is by making payments for your current bills on time.

Over all, whatever your current bad credit predicament, you could still be approved for a car loan. Start making the little changes necessary to build up your credit score. If you ended up in a bad credit situation by no fault or choice of your own, explain your situation and start rebuilding your credit with a car loan. If you’ve had a habitual lifestyle of bad credit, start making financial decisions that will better your situation.

Looking to Rebuild Your Credit? A Car Loan can Help!

Are you currently living with bad credit? If you’re ready to start fixing your credit, getting a car loan is a great place to start. To begin the process of acquiring a bad-credit car loan, it’s important to know what your credit score is and why. You can find out your current credit score using Experian, TransUnion, or Equifax; they provide free credit reports once every 12 months.

Once you’ve acquired your score and credit report, it helps to know why your score is what it is. The best way to figure that out is by understanding how credit scores are formulated. According to, credit scores break down into five categories with percentages of importance:

  1. Payment history: 35%, lenders want to know if you pay on time; they look at past credit accounts to determine if you’re in the habit of doing so.
  2. Amounts owed: 30%, lenders want to see how much you owe on other accounts to see if you’re overextending yourself; too much credit used on one account looks problematic and thus can lead to a lower score.
  3. Length of credit history: 15%, having a longer history of credit use typically leads to a higher credit score because the credit is viewed as more established; however, you can also have a short credit history with a high score.
  4. Credit mix in use: 10%, “FICO Scores will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.” Having a greater variety can help boost your credit.
  5. New credit: 10%, starting several different credit accounts over a short period of time is typically not good for your score. So, when trying to repair your credit, be sure to manage this process carefully by starting one account at a time spaced out across several months. A car loan is a great place to start!

When you have bad credit, lenders have to make decisions based on why you have that low credit and what you’re currently doing to make your credit better. Having a car loan increases your credit mix and, as long as you make your payments, it will help you build payment history and the length of your credit history over time as you make the loan payments.

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How to Buy a Car with Bad Credit

When working with bad credit, there is one primary hurdle that you’ll have to get past initially in order to get an auto loan: the application. With many lenders, their applications will automatically drop/disqualify anyone who has a credit score that’s below a certain marker. So, it’s typically best to find lenders who specifically state that they approve bad-credit loans or use a service like Federal Auto Loan that can connect you with several bad-credit lenders who are ready and willing to work with individuals with poor credit. The truth is that a low credit score does present more challenges for buying a car, but it doesn’t mean that you absolutely can’t; there is still potential depending on your situation and the lender you find. You will have some extra and/or different steps that you’ll have to take, but to drive your own car, most people would consider the extra effort more than worth it.

Oftentimes, there are subprime, auto-loan lenders who are willing to work with people who have not-so-good credit. They look at other factors that can qualify a person for receiving a loan; factors like current and past employment along with current income level. And, they’ll look at why your credit is where it is as opposed to just seeing the number and saying no. Finding one of these lenders is your first step in the car-buying process. As someone who currently has bad or low credit, it’s important to reframe your thinking on car-buying as you enter this process. Your primary goal is to get a usable, trustworthy vehicle, so, your research does not start with looking up the exact vehicle you want; it starts with figuring out your budget and finding out what financing is available for you. Then, once you get a bad-credit car loan in place, you can begin looking for a vehicle that will best serve you.

The benefit of using a consumer-connection service like Federal Auto Loan is that the initial research for lenders is done for you. Plus, with Federal, you know that your information will be passed onto dealers/lenders who will at least review your application. Federal doesn’t reject or disqualify any legitimate applications. We make sure your information is passed to lenders that fit your situation regardless of how low your credit score may be.

It’s always best to have multiple options in any buying situation, including the auto loan market. By having more options, you get to decide, you do not have to work with one dealer because they’re your only choice. With Federal Auto Loan, we expand your ability to reach lenders and/or dealers in your area.

Then, your ability to have multiple options depends on if one or more dealers review your application and choose to approve you. Unfortunately, we can’t guarantee approval, but we can guarantee that your information will be passed on for review. You get to start with a door open as opposed to shut in your face with one glance at your credit score, and we know that’s a welcomed change for most bad-credit car buyers.

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Car Dealerships for Bad Credit Near You

When you’re faced with bad credit, finding a financer that will work with you can be very challenging. And, although getting approved with your current bank or credit union can be difficult, it’s worth asking. If they decide to work with you, awesome! If they turn you down, don’t give up. There are other options for people with low to bad credit.

One option that tends to be successful is finding a local dealership that offers special financing for poor credit. Subprime lenders are usually more willing and accustomed to working with people who have bad credit. Oftentimes, the primary issue here is finding one of these dealerships/lenders.

At Federal Auto Loan, we know how difficult it can be to get the financing you need when you’re struggling with credit. That’s why we want to help you get started today. We work with a nationwide network of dealers that know how to handle unique credit situations. Let us help you find a car dealership for bad credit near you. Get started by filling out our no-obligation, free auto loan request form now.

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