Best Bad-Credit Auto Loans

It’s possible to get an auto loan for bad credit. Whether you’re dealing with previous bankruptcies, late payments, or other serious credit problems, you can qualify for a car loan. Comparing offers from multiple lenders is the best way to ensure you get a good deal.

As a borrower with bad credit, you can expect higher interest rates and lower maximum loan amounts. But as long as you remain flexible, you can get an auto loan with reasonable terms. More companies than ever offer car loans for bad-credit borrowers, including online-only lenders, banks, and car dealerships. 

Here are the best bad-credit auto loans with the most competitive rates and terms. 

Where to find the best bad-credit auto loans 

To help you narrow down your options, we’ve compiled a list of the best auto loans for borrowers with bad or no credit. Here are our lender recommendations and the most significant benefits they offer.

You can click the lender’s name in the table below to jump to our review of its bad-credit auto loans—or keep reading for the details on all five.

Lender	Benefit
CarsDirect	Marketplace for all credit types
CapitalOne	Flexible term lengths
Auto Credit Express	Specializes in no and poor credit borrowing
MyAutoLoan	One application for multiple loan offers
Carvana	Online car buying

CarsDirect

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• No minimum credit score requirement
• Access a vast network of lenders
• Excellent resource hub for car buyers

CarsDirect welcomes borrowers of all credit backgrounds, with no stated minimum credit score. The company excels in connecting prospective buyers to a national network of lenders, offering competitive rates for bad-credit auto loans.

To further empower borrowers, CarsDirect maintains a rich resource hub. This includes articles, tools, and tips about car buying, loan application processes, and managing credit health.

Capital One

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• Prequalification available
• Flexible term lengths
• Extensive dealer network

Capital One seeks to simplify the auto loan process for bad-credit borrowers with a clear option for prequalification. This allows you to know whether you can get approved before visiting the dealership—with no credit score impact.

It also offers flexible term lengths, providing the freedom to choose a loan duration that fits your budget. Capital One also has a wide dealer network, ensuring a seamless car buying experience.

Auto Credit Express

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• Specializes in bad- and no-credit car loans
• Refinance options
• Free credit score tool

Auto Credit Express specializes in auto loans for individuals with poor or no credit history. This expertise ensures support from a lender that understands your unique circumstances.

Auto Credit Express also provides refinance options, presenting a potential solution to high-interest-rate auto loans. It also allows you to keep tabs on your credit health with a free credit score tool.

MyAutoLoan

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• Multiple loan offers with one application
• Provides information on loan rates and payments
• Useful tools and calculators

MyAutoLoan presents an efficient path to securing a bad-credit auto loan. One application can result in multiple loan offers. This reduces the need for repeated contact with several lenders.

To assist you in your decision, MyAutoLoan provides transparent information on potential loan rates and payments. It further supplements its products with helpful tools and calculators to guide you throughout the loan process.

Carvana

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• No in-person dealerships
• 100% online car buying experience
• 7-day return policy

Carvana is pioneering a unique, entirely online approach to car buying and financing. It eliminates physical dealerships, providing you with a convenient 24/7 platform for securing an auto loan.

Beyond convenience, Carvana’s aggressive transparency, evident in its seven-day return policy, allows you to confidently choose a vehicle that best meets your needs. Its open approach to auto financing makes it popular among bad-credit loan borrowers.

How does bad credit affect your auto loan eligibility?

Credit bureaus use a scoring system to create individual credit scores based on a borrower’s payment history, amounts owed, credit mix, and new credit, with scores typically ranging as follows:

Credit score category	Score range
Excellent	800 – 850
Very good	740 – 799
Good	670 – 739
Fair	580 – 669
Poor	300 – 579

Most lenders consider scores between 300 and 579 bad credit. Some lenders might also include scores below 630. Having bad credit significantly affects your auto loan eligibility in several ways:

• Higher interest rates: Lenders view borrowers with bad credit as higher-risk, which often results in higher interest rates than those with better credit scores, meaning you’ll pay more over the life of the loan.
• Larger down payments: To mitigate risk, lenders may require a larger down payment from borrowers with bad credit, which can make it challenging to afford the initial cost of purchasing a vehicle.
• Stricter loan terms: Borrowers with bad credit may face stricter loan terms, including shorter repayment periods, which can lead to higher monthly payments.
• Requirement for a cosigner: Some lenders may require a cosigner with better credit to approve an auto loan for a borrower with bad credit. This can add complexity to the loan approval process.
• Limited loan amounts: Lenders may offer smaller loan amounts to borrowers with bad credit, limiting the type of vehicle you can purchase.

For those with no credit history, it can also be challenging to secure an auto loan because lenders have no basis to assess risk. However, some auto lenders specialize in loans for borrowers without credit. Options such as secured credit cards or credit-building loans can help build a credit history if you plan to apply for an auto loan.   

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Tip

You can check your annual credit report for free. Check for errors in your report, and if you find any, dispute them. If you don’t have credit, you won’t see a report. Review your score as soon as possible to help prepare for your car purchase. 

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Eligibility requirements for an auto loan

Your credit score determines how much it costs to borrow money. If you have bad credit, qualifying for an auto loan can be difficult. When you find a lender, you can typically expect higher interest rates, less competitive repayment terms, and more fees. 

Most lenders require borrowers to meet the following eligibility requirements. 

• Proof of income: Lenders may need to see paystubs, bank account statements, or tax forms to verify income. 
• Government-issued identification: You might need to provide proof of identity. You can often use your passport, driver’s license, or other government-issued identification card. 
• Credit and financial history: Lenders review credit history and credit scores to determine eligibility and loan terms. 
• Vehicle information: Lenders need information about the vehicle, including price, make, and model. 
• Car insurance: You must provide proof of auto insurance before finalizing your car loan. 

What to consider when choosing a bad-credit auto loan lender 

You can improve your credit score, but it often takes time. If you don’t have time and need to buy a car immediately, you can take steps to ensure you’re making a wise financial decision. 

Your bad-credit car loan may not have a competitive interest rate or terms, so it’s essential to ensure you can handle the repayment terms. Before finalizing a bad-credit auto loan, here are the questions to ask yourself. 

• Can I afford the monthly payments? Bad-credit auto loans often have higher payments than other car loans. Make sure you can afford the monthly payment with your current income and bills. If you can’t, consider borrowing less or extending the repayment term. A longer repayment term will likely increase the total cost of the loan, but it might be worth it to make the payments more manageable. 
• Could I refinance the loan later? You can often refinance an auto loan six to 12 months after finalizing it. You can increase your credit score or establish a credit history during that time and then refinance for a lower rate.
• Did I compare loan offers from at least three lenders? It’s hard to know whether a loan is competitive unless you have other offers to compare it to. Compare interest rates, fees, and repayment terms. 
• Did I read the fine print of a loan offer? It’s always essential to understand the details of a loan offer. It’s even more critical when shopping for a bad-credit car loan because the loans are more expensive and might have hidden fees. Read the contract, and understand the loan details before you finalize it. 
• Did I calculate the total interest and fees? Consider the monthly payment for an auto loan, but it’s also critical to understand the total cost of the loan. Calculate the total interest costs and other fees to determine whether the loan is worth it. 

“Before you take out an auto loan, ask yourself: Can I afford the payments? Do I understand all the fees and expenses? Does the lender charge prepayment penalties?”

Jim McCarthy

CFP®

How to improve your chances of getting an auto loan with bad credit 

It can be challenging to qualify for an auto loan with bad credit, but you can take the following steps to increase your approval odds. 

• Prove you can afford payments: Lenders want to know that borrowers can afford the loan. It’s even more important to prove you can afford the payments if you don’t have a solid credit score because lenders have less assurance that you will repay the loan. If you can provide proof of income that exceeds the minimum requirements, you might have a better chance of getting approved. 
• Borrow less money: Getting approved for smaller loan amounts can be easier. Consider whether you can provide a down payment to lower the amount you need to borrow. You could also buy a car that costs less. 
• Apply with a cosigner: Some lenders allow borrowers to apply with a cosigner. Your cosigner is responsible for loan repayments if you default, reducing the risk for the lender. A cosigner with excellent credit might help you qualify for a loan or score a lower rate. 

Can you share effective strategies for improving one’s credit score in the context of seeking better terms on an auto loan? How soon can borrowers expect to see improvements that could help their loan eligibility and rates?

Our expert advises: How soon can you expect to see improvements to your credit score?

Jim McCarthy

CFP®

How long it takes can depend on why the borrower’s credit is bad. If it is for many late payments, only time with reliable, on-time payments will move the needle. If your credit is bad because of a high utilization rate, paying down balances and stopping using new credit can improve your credit score faster.

FAQ

Can I get financing to buy a used car from a private seller?

Yes, you can secure financing to purchase a used car from a private seller. However, it’s important to ensure the financial institution you choose offers such loans. Do a comprehensive review of your lender’s policies and check whether private-party car loans are on the list.

Can I get a cosigner for my auto loan?

Yes, you can use a cosigner for your auto loan. The cosigner’s strong credit score can help you get better loan terms and interest rates. Remember: The cosigner shares the responsibility of repaying the loan if you default.

Can I get preapproved before going to a dealership?

Yes, and we recommend getting preapproval before stepping foot into a dealership. Preapproval gives you a clear understanding of your loan amount, terms, and interest rates. It also provides extra leverage while negotiating at the dealership.

Can I get a bad-credit car loan if my car has been repossessed in the past?

Securing a car loan with bad credit after a prior car repossession may depend on the lender. Some lenders are willing to work with borrowers who’ve had repossessions, but others may not.

Is it possible to get a better auto loan after my credit score improves?

Improving your credit score always puts you in a better position when applying for an auto loan. Higher credit scores often lead to better loan terms, lower interest rates, and more favorable repayment schedules. After raising your credit score, it might be worth considering a refinance on your auto loan to benefit from these advantages.