How to get a car loan with bad credit
When you have bad credit, trying to find an auto loan to buy a vehicle can be stressful. Car loans for bad credit usually come with higher interest rates and may require large down payments. However, there are options available when it comes to auto loan providers that specialize in bad credit auto loans.
In this article, Home Media’s review team will walk you through the loan application process and provide tips to help you increase your chances of getting approved. Based on our research, we will also recommend several auto lenders that offer services to people with poor credit. including some that offer the best car loan rates or the best auto refinance rates of 2022.
10 best car loan lenders with bad credit
We’ve compiled a list of 10 auto loan provider recommendations to get you started on your search. Which company is best for you will depend on your situation. We recommend contacting lenders to find the best loan terms.
We have provided information below on three of the best bad credit car loan providers.
Departure annual percentage rate of charge (APR): 1.9% for new cars, 2.15% for used cars
Loan amounts: minimum $8,000
Loan conditions: Up to 84 months
Availablity: 48 states (not available in Alaska or Hawaii)
Minimum credit score: 575
The myAutoloan marketplace allows you to compare when buying new and used car loans, refinance auto loans and lease buyout loans. New car loan rates start at 1.90% for borrowers looking to finance their vehicle for 36 months or less. Since myAutoloan operates as a marketplace for lenders and has a minimum required credit score of 575, it provides more opportunities for borrowers to get approved.
Read more: myAutoloan review
From April: 2.25%
Loan amounts: $5,000 to $85,000
Loan conditions: Up to 84 months
Availablity: 50 states
Minimum credit score: 580
Auto Approve is an auto refinance and lease buyout specialist. It does not offer auto credit for new or used vehicles. Rates start at 2.25% APR for refinancing, although only borrowers with high credit scores qualify for the best auto loan rates. People with bad credit who want to refinance their car loans can be approved by Auto Approve, as the company has a minimum required credit score of 580.
Read more: Automatic Approval Review
From April: 3.74%
Loan amounts: $10,000 to $80,000
Loan conditions: 36 to 72 months
Availablity: 48 states (not available in Nevada, Vermont or Washington, DC)
Minimum credit score: 620
Ally Clearlane is part of Ally, which is one of the largest auto finance companies in the United States. The lender only offers auto loan refinance and lease buyout services. According to our research, APRs for refinancing start at 3.74% and loan terms of up to 72 months are available. Ally Clearlane has a minimum required credit score of 620, making it easier for those with less than excellent credit to get approved.
Car loan rates for bad credit
Bad credit is defined as a person’s inability to pay bills on time and the likelihood of not making future payments. This is usually reflected in a FICO score of 579 or lower.
If your credit score falls below this threshold, you may not qualify for all loans and may face higher interest rates. The tables below show the average car loan interest rates by credit score for new and used cars, according to from Experian State of the automotive financing market Q1 2022 report.
Buyers with credit scores below 660 enjoy higher interest rates. Note that interest rates are also higher for used cars than for new cars. If your budget is tight and you can only afford a used vehicle, you will pay less overall but you will have a higher interest rate.
Applying for a car loan with bad credit
Even if you have bad credit, there are many auto financing options to choose from – you just need to find the right lender for your situation.
There are four types of lenders you can go to, including:
- Online lenders: Online lenders are convenient because you can find out if you’ve been approved for a new loan in minutes. These lenders may also offer you a lower interest rate since they have lower overhead costs. Online lenders are also more likely to offer pre-approval so you can get an idea of your loan repayment and interest rate before making a purchase.
- Banks: Many national and local banks offer car loans. However, some banks may only allow you to obtain a loan through dealer arranged financing.
- credit unions: Most credit unions offer low interest car loans. You can apply for an auto loan directly or through a dealership. The only downside is that you may need to be a credit union member to avail of its offers.
- Car dealerships: Many dealerships offer their own financing options to car buyers. And if they don’t, others will shop for you with financing arranged by the dealer.
Bad Credit Car Loan Information
To apply for a car loan, you will need to have certain information at hand, including:
- Your name, address and telephone number
- Your social security number
- Your credit score
- Gross annual income information
- Vehicle information such as model, age, and mileage of the vehicle you wish to purchase or refinance
Some financial institutions may also request additional information before a loan is approved:
- Driving license
- Personal references
What to do if you are refused for a car loan with bad credit
When you apply for a car loan or refinance, you may not get approved the first time. This may be due to your poor credit rating or a lack of established payment history. Here are some tips that can help increase your chances of being approved by an auto lender:
Car loan for bad credit: conclusion
If you have bad credit, you still have options for car loans. You can get bad credit car loans from a number of banks, credit unions, car dealerships, and online lenders. Typically, you’ll pay a higher interest rate, but you don’t have to settle for the first offer you come across. We recommend shopping around and comparing options to find the best car loan for you.
Below are some frequently asked questions about car loans for bad credit.
Car loans for bad credit: FAQ
Because consumers rely on us to provide unbiased and accurate information, we’ve created a comprehensive rating system to formulate our ranking of the best car loan companies. We’ve collected data on dozens of loan providers to score companies on a wide range of ranking factors. The end result was an overall score for each vendor, with the companies scoring the most points at the top of the list.
Here are the factors taken into account by our assessments:
- Reputation (30% of total score): Our research team considered ratings from industry experts and each lender’s years in business to assign this rating.
- Availability (20% of total score): Companies that cover a variety of circumstances are more likely to meet the needs of borrowers.
- Loan details (15% of total score): We considered the loan types, terms and loan amounts available from each lender to determine this score.
- Prices (25% of the total score): Auto loan providers with low APRs scored highest in this category. Available discounts have also been taken into account.
- Customer experience (10% of total score): This score is based on customer satisfaction ratings and transparency. We also considered the responsiveness and helpfulness of each lender’s customer service team.
In this article, we selected companies with little or no minimum credit score requirements and low minimum annual income requirements.
*Data correct at time of publication.