Bad credit auto loans with reasonable interest rates can be difficult to find. While it may be hard to secure an auto loan with poor credit, it’s not impossible. Many auto lenders specialize in providing auto loans for bad credit drivers.
In this review, we’ll list several auto loan providers that offer loans for drivers with low credit, no credit, and bankruptcies. We’ll also provide tips for how to apply for a loan when you have bad credit and how to improve your credit score. While the lowest rates with the best auto loan providers may not be available to those with poor credit, a low credit score doesn’t mean a reasonable car loan is impossible to find.
You can see bad credit auto loan offers from multiple lenders using AutoCreditExpress.com.
In this article:
Can You Get A Car Loan With Horrible Credit?
Yes. Even with horrible credit, it is possible to get a car loan. It usually helps if you have a steady income and/or have someone with good credit cosign your loan.
It may be difficult to find a bad credit car loan with a low interest rate if your credit score is under 600. When you look for auto financing, seek out lenders that offer prequalification. Prequalification allows you to see interest rate offers without the loan company performing a hard credit check. A hard credit check can further hurt your credit score.
Be prepared to face higher interest rates if you have poor credit. However, you can reduce the amount of interest you will pay on a bad credit auto loan if you place a bigger down payment or request a shorter loan payoff period.
19 Auto Loans For Bad Credit Drivers
The list below names 19 auto loan providers that offer loans to drivers with bankruptcies and/or poor FICO credit scores. Several of the companies listed below even specialize in bad credit auto loans. Which lender will work best for you depends on your specific circumstances, but this list is a good place to begin your search.
Don’t hesitate to submit loan applications to companies that allow you to prequalify without a hard credit check. You should only agree to a hard credit check once you plan to accept the loan offer (and after comparing prequalification offers).
|Auto Loan Provider|
Minimum Credit Score Required
Minimum Annual Income Required
|Prestige Financial||No minimum credit||$27,000|
|Vroom||No minimum credit||$21,600|
|Auto Credit Express||No minimum credit||$18,000|
|Capital One||No minimum credit||$18,000|
|Carvana||No minimum credit||$4,00|
|New Roads||No minimum credit||Not specified|
|Credit Acceptance Corp||No minimum credit||Not specified|
|Drivetime||No minimum credit||Not specified|
|Autopay||No minimum credit||Not specified|
|Lightstream||No minimum credit||Not specified|
|Carmax||No minimum credit||Not specified|
|CarZing||No minimum credit||Not specified|
|Byrider||No minimum credit||Not specified|
|RoadLoans||No minimum credit||Not specified|
Applying For A Bad Credit Auto Loan
Applying for auto financing used to take place primarily in banks or at the car dealership. Today, most companies have online applications, making it easy to request and compare several auto loans at a time. You can also use a service like AutoCreditExpress.com, which lets you see personalized loan offers from multiple lenders at once. However, it’s still a good idea to apply for your auto loan at your local bank or credit union in addition to searching online.
Look for companies that offer a preapproval process that does not require a hard credit check. What this means is that you will self-report your FICO score and income information to the lender. You will then be made a provisional auto loan offer. This is not an official offer, and your terms may not be finalized until after a hard credit check. Do not submit to a hard credit check unless you are fairly confident you will accept the loan offer. You want to limit the number of hard credit checks as much as possible.
While applying, you will likely need to supply potential lenders with information such as:
- Personal details like your name, address, age, and Social Security number
- Gross annual income information
- Vehicle information like model, age, mileage, and vehicle identification number (VIN)
Before you finalize your auto loan, you may also be required to supply copies of your:
- Driver’s license
- Recent pay stubs
- Personal references
Your credit score is the most important factor that determines your auto loan interest rate. The tables below show the average auto loan rates by credit score for new and used car purchases, according to a 2020 Experian State of the Auto Finance Market report.
|Average Auto Loan Rates For New Car Purchases|
|Credit Score||Average Auto Loan Rate|
|300 – 500||13.97%|
|501 – 600||11.33%|
|601 – 660||7.14%|
|661 – 780||4.21%|
|781 – 850||3.24%|
|Average Auto Loan Rates For Used Car Purchases|
|Credit Score||Average Auto Loan Rate|
|300 – 500||20.67%|
|501 – 600||17.78%|
|601 – 660||11.41%|
|661 – 780||6.05%|
|781 – 850||4.08%|
As you can see from the tables above, auto loan interest rates increase steeply for borrowers with credit scores of 660 and below. You will also notice that interest rates for new car purchases tend to be lower than those for used car purchases. However, if money is tight, you may still save more by purchasing a used car, though you will pay a higher interest rate.
The best way to get a lower interest rate if you have poor credit is to add a cosigner with good credit to your loan. A cosigner is someone who accepts responsibility for the loan and will be on the hook with collections if you miss any payments.
While it may not lower your interest rate, placing a larger down payment or opting for a higher monthly payment can help you save money on a bad credit auto loan. A shorter loan term may also reduce overall costs. The more quickly you pay off your auto loan, the less interest you will ultimately accumulate.
Tips For Improving Your Credit Score
A good credit score is vital to saving money and has benefits beyond a low interest rate on your auto loan. In several states, your credit history may also be used to determine your auto insurance premium. If you have bad credit, you should work to improve it as soon as possible. However, raising your credit score cannot be accomplished overnight.
Some ways to improve your credit score include:
- Open a credit card: Don’t let your credit balance get too high, and pay off your bill in full each month. This shows lenders that you are dependable and can be trusted to make your loan payments.
- Increase your credit limits: The amount of credit you’re using affects your score. For example, if you had a credit card with a limit of $1,000 and had a balance of $500, you’d be using 50 percent of your credit. However, if you asked your bank to increase your limit to $2,000, you’d only be using 25 percent of your credit. This can raise your score.
- Debt consolidation: Try to consolidate your debts into one place with the lowest interest rates possible.
- Pay down existing debt: This will save you money in the long run and help your credit score.
- Wait: Certain negative factors will fall off your report after a number of years. Hard credit checks stop affecting your score after two years. Late payments, collections, and bankruptcies fall off your report after seven years.
- Credit monitoring: Many of the major credit bureaus, such as Experian, Transunion, and Equifax, offer credit monitoring and tools for improving your credit. Take advantage of these programs.
- Check your report: Request a copy of your own credit report and look for errors or outstanding debts you may have forgotten about.
If you initially take out a bad credit auto loan but later improve your credit score, be sure to consider auto loan refinancing. This involves taking a new loan with better interest rates to pay off the existing loan. You may want to refinance your auto loan after your credit score moves above 660 and 780.
To start comparing auto loans for bad credit from multiple lenders, visit AutoCreditExpress.com.