Subprime Auto Loans

Quick Summary

Subprime auto loans are similar to bad credit car loans, but with an additional purpose: Helping borrowers who don't have much of a credit history at all. While those with low credit scores may struggle to find the auto financing that they need, those who have very little credit history have a different problem: Lenders don't know what to expect. This can also lead to approval problems with car loans. Subprime loans exist to help these low-credit and no-credit borrowers find the funds they need to buy the right vehicle.

The right candidates for subprime auto loans are often young people who haven't had a chance to build up much credit, or have made a couple unwise credit decisions in their recent past and haven't had a chance to build up good credit again.

Advantages & Disadvantages


-Ideal for people buying their first cars. Because subprime loans are available to those with no credit, they can be suitable for borrowers who are buying their first car but don't have enough cash.

-You can start building credit. Subprime loans can also help borrowers build good credit, particularly if their credit history is currently a bit lacking.


-Lenders will adjust terms for risk. Remember, the term "subprime" means that lenders see significant risk in making these loans. As a result, the approval process may be more stringent, requiring proof of income and raising rates to help offset this risk.

-Inexperience may be an issue. Since subprime borrowers are often still starting their financial lives (as well as their adult lives), they may not have the experience to make correct financial decisions every time. This is why research is particularly important for loans like these.

What Should I Know About Title Auto Loans?

If you lived through the housing market crash, the word "subprime" may leave a foul taste in your mouth. However, it's important to note that a lot has changed since then regarding lending practices, and those subprime loans were primarily mortgages: Subprime auto loans, being smaller and often focused more on straightforward vehicle needs, shouldn't have the same negative connotation. To find out if these loans are right for you, try comparing both subprime loans and bad credit loans to see what kind of terms both offer. Remember, not all lenders or dealers provide these types of loans.