How to get a car loan with bad credit Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by providing you with financial calculators and tools that are interactive that provide objective and original content. We also allow users to conduct research and compare information at no cost and help you make financial decisions with confidence. Bankrate has partnerships with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The offers that appear on this site are from companies that compensate us. This compensation could affect how and where products appear on this site, including for instance, the sequence in which they appear within the listing categories, except where prohibited by law. This applies to our mortgage home equity, mortgage and other home lending products. This compensation, however, does affect the content we publish or the reviews appear on this website. We do not include the vast array of companies or financial deals that might be open to you. Anna Kraynova/Getty Images

6 minutes read Read Published March 02, 2023

written by Hanneh Bareham. Written student loans reporter Hanneh Bareham is an expert in all matters connected to student and personal loans and helping you finance your next project. She strives to help people achieve their collegiate and financial goals by making loans easier to understand. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping readers gain the confidence to manage their finances through providing concise, well-studied information that breaks down otherwise complex issues into digestible chunks. The Bankrate promises

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who ensure everything we publish will ensure that our content is reliable, honest and reliable. We have loans reporters and editors focus on the areas that consumers are concerned about most — different types of lending options and the most competitive rates, the best lenders, the best ways to pay off debt , and more . This means you’ll be able to feel secure when making a decision about your investment. Integrity in editing

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If you have questions about money. Bankrate can help. Our experts have been helping you master your money for over four years. We continually strive to give our customers the right advice and tools required to be successful throughout their financial journey. Bankrate adheres to strict standards , so you can trust that our content is truthful and accurate. Our award-winning editors and journalists produce honest and reliable information to assist you in making the right financial decisions. Our content produced by our editorial staff is factual, objective and is not influenced by our advertisers. We’re transparent about the ways we’re in a position to provide quality content, competitive rates and helpful tools to you , by describing how we make money. is an independent, advertising-supported publisher and comparison service. We receive compensation for the placement of sponsored products and, services, or when you click on certain hyperlinks on our website. This compensation could affect the way, location and in what order products appear within listing categories in the event that they are not permitted by law. This is the case for our mortgage, home equity and other products for home loans. Other factors, like our own website rules and whether the product is available within your area or at your own personal credit score can also impact the manner in which products appear on this site. Although we try to offer an array of offers, Bankrate does not include information about every financial or credit products or services. If you have a poor credit score, you may be concerned about whether you will get approved for an auto loan from an established lender. Before you decide to take out a loan through a buy-here-pay-here dealer, consider researching all possible alternatives. Although being a victim of bad credit — a credit score between 300 and 500 — can make getting a more difficult, it’s not difficult. Additionally, you’ll notice that the cost of borrowing is much lower when you use a bank credit union or online lender regardless of your credit score. How to apply for a car loan that are based on bad credit Prepare on several aspects prior to beginning the application process to get an automobile loan for those with bad credit. Take note of your credit score, and make sure all terms are finalized before the purchase goes through. 1. Be aware of your credit score prior to you start shopping, check the credit scores of your customers. Based on the FICO credit scoring system, which ranges from 300 to 850, any score that falls below 580 is considered poor. Your FICO score will be calculated using factors such as how much you owe as well as the length of your credit history and your payment history. Not making your payments on time, regularly spending more than your available monthly credit, and having a poor credit history could all negatively impact the credit score. Bankrate tip

Prior to applying for an auto loan be sure to avoid opening the credit cards of your new loans. Be sure to do this prior to when you start shopping puts you in a favorable standing with the lender.

2. Set aside money for a downpayment If you have a lower credit score, a car can increase the chances of getting granted the auto loan. Setting aside some extra cash each month to pay for a down payment could also offset more expensive interest rates due to having a low credit score. It also could lower your loan-to-value ratio, which can help you get better terms. The experts recommend a down payment that is at least 20 percent however if that’s just too much, just pay what you are able to afford. It is possible that dealers who deal with credit-challenged customers will accept as little as $1,000. 3. Research Prepare as much as you can so that you don’t get in a rush when the time comes to discuss the terms. When you’re applying for a loan make sure you know what are the most common APRs offered by auto lenders. With a bad credit score, you’ll likely be offered some of the highest rates advertised. If you’re buying used it’s also beneficial to know the of the vehicle you’re considering. 4. Explore the options once you have started the process of shopping Don’t be limited to one lender. There are a variety of lenders that can help you obtain an loan that include: Banks and credit unions: If already have relationships with a financial institution or credit union start with them here. Certain credit unions and banks offer members discounts on rates. Online lenders: A lot of online lenders have a prequalification tool on their sites, which allows you to see what terms you might be eligible for prior to applying. This could save you from the hassle of a credit check in case you don’t meet the criteria. Dealerships for cars: You may qualify be approved if you have the required financial and credit guidelines. You’ll have a meeting with an agent from the finance department, and they will send your information to different lenders. Some dealers may also offer programs for those with bad credit history. But, dealers frequently mark up the rates they offer in order to earn more money off the deal. Buy-here, pay-here dealerships are a good option. Pay-here or Buy-here dealerships are useful when you’re not approved by an institution or lender to get a loan however, be careful. While these types of dealerships are better able to accept someone with , the interest rates are often much higher. Bankrate tip

Lenders run an extensive credit test when you apply. It’s wise to consider at least three lenders within a 14-day timeframe to ensure that your credit score doesn’t suffer multiple blows.

5. Prequalify with lenders through Prequalification lets you see whether you’re eligible for the loan prior to applying and also view estimated loan terms. Additionally, you’ll be able to save time when applying and avoid the needless hard credit checks that can affect your score on credit. When you’re prequalified with a few lenders, you’ll be able to submit documents and be preapproved. It’ll result in a hard credit assessment, but an auto loan has more weight because it demonstrates the lender’s willingness to provide an automobile loan to you. Additionally, you’ll have leverage when walking into the dealership, and you can negotiate as cash buyers. 6. Make sure that the terms are in writing 6. Avoid subprime lenders Subprime lenders can seem like a sure bet to anyone wondering how to secure a car loan with bad credit. They typically cater to customers with lower credit scores and make the process of buying a car seem easy and stress-free — at first. But they may come with astronomically high interest rates and can mean paying thousands of dollars extra to pay interest throughout the life of the loan. Bankrate tip

Consider subprime lenders only in the event that you do not have another option for financing.

7. The terms of the shop loan terms do not include monthly payments. monthly payments look good on paper and are typically used to lure buyers. They could result in you spending more on your vehicle over the life of the loan due to the fact that they . Because car loans are available for bad credit have higher APRs, you may end up paying thousands more than your vehicle’s value at the expiration of the loan because of the interest accrual. When shopping for a car, look for the most attractive terms — usually with the lowest interest rate over the shortest amount of time. That way, you will have more manageable monthly payments with reasonable interest rates. If you are unable to find a rate that is low, consider shopping for a different vehicle. 8. Bring a friend with you and think about co-signing with an acquaintance or family member to join you, suggests Massachusetts-based consumer attorney Yvonne Rosmarin. A trusted friend or relative at the table to negotiate can inspire confidence. And confidence, combined with knowledge, can lead to more favorable loan terms. You might consider asking a friend or family member to serve as a . Ideally, the person you choose to co-sign with must have a stable sources of earnings, strong credit score and an exceptional credit background. Co-signers lower the risk to lenders- because the co-signer is accountable for the loan in the event of a default on the payments. The addition of a co-signer an advantage and typically results in lower interest rates. 9. Look out for add-ons and scams Nonprime buyers are more likely to come across loan contracts that don’t include any essential products and services, according to Josh Frank, former senior researcher for the Center for Responsible Lending. Other expenses, like that can add up for those who aren’t prime buyers. Don’t sign a loan which is contingent on , such as extended warranties, aftermarket services or . Take note of such extras particularly if you have to make an application at a pay-here, buy-here, or buy-here dealer or plan to trade in your vehicle. Also, remember that incorporating these expenses into the loan is a way to have to pay more in interest over the loan period. 10. Be sure the terms are in place if you are financing via a dealer make sure to be sure that the terms are final before you sign. If you don’t do this, you could be charged more monthly. Some dealers who are shady tell buyers that their financing may not be fully completed until after the buyer finalizes the purchase, and they must accept an interest rate that is higher or even return the vehicle. This is known as . Where can you locate how to get a bad credit car loan Car loans are offered through a variety of bank, credit unions and online lenders. Dealership financing, which is discussed in the previous paragraph. But if you have bad credit, you’re more likely to be able to secure a loan with reasonable terms through the internet lender. Certain credit unions may accept a bad credit car loan if you have a good track record with their institution. Take a look at Bankrate’s recommendations for the best options to consider. Credit-worthy car loan APRs Borrowers with good or excellent credit score get the most competitive auto loan offers. However, that doesn’t mean you’ll have less options even if you have a credit score less. However, your costs for borrowing are likely to be more expensive due to the risk you present to the lender. Here’s a breakdown on the current average interest rates by credit rating from for the fourth quarter of 2022 The credit score range

New car

Car used

Deep Subprime: 300 to 500



Subprime: 501 to 600



Near Prime 601 to 600



Prime 661-780



Super Prime 781 to 851



The next step is to take if you are a person with bad credit, it may be tougher for you to obtain a car loan. There could be less favorable terms or even lenders who are predatory. The good news is that doing your research, saving for a downpayment and getting preapproved will help you prepare to get the most favorable rate for an automobile loan. If you that’s right for you, make timely payments to improve your credit score. In the future, you might find an loan with better conditions. Find out more


Written by Student loans reporter Hanneh Bareham specializes in everything related to personal and student loans and can help you finance your next project. She aims to help people achieve their collegiate and financial goals by making loans easier to understand. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has written and edited for Bankrate since the end of 2021. They are dedicated to helping readers gain the confidence to manage their finances with precise, well-researched and thorough information that breaks down otherwise complex topics into digestible chunks.

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