Bad Credit & Car Loan Approval - Is It Possible?

Can I have a bad credit and a secured loan approval from a bank?

Yes!

In some cases banks approve a secured loan application even though the applicator has bad credit. Car Loans are not given only to persons with perfect credit: people with not so good credit history can be granted a secured loan - if the bank determines that they qualify for it. But before we list the requirements you need to satisfy in order to qualify for a car loan, let's address the difference between unsecured and secured loans.

Car loans are often easier to get then a standard bank loan, because car loans are secured loans. An example of an unsecured loan is a bank loan or a credit card: the bank cannot seize an asset to repay the loan if you don't make your payments. A car loan, on the other hand, is secured by the car itself. If you don't make your payments, the lender repossesses the car, sells it, and uses the proceeds to recover their original loan. Because the loan is secured, it is less risky, and therefore it is easier for the lender to decide to lend you the money.

What do I need to qualify?

Obviously, the better your credit, the easier it will be to get the loan. However, as we said above, even with bad credit, a car loan approval is not beyond your reach. Even with a bankruptcy on your credit report, you may still qualify for a car loan.

Often, and especially if you have bad credit, car loan lenders will require the following to approve your application:

	a security deposit or down payment
	proof of income (many car loan lenders will require a proof that you are earning a certain amount, and that you have been at your job for a period of at least six months); and
	you will probably be charged a higher interest rate than someone with perfect credit. (Those who want to know more about how interest calculations are performed, please visit our Calculating Compound and Other Interests page).