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Do you have bad credit? If so, you might think it’s impossible for you to finance the purchase of a car. The good news is, it is possible to get an auto loan for bad credit even if you have past bankruptcies, late payments, or other serious credit problems.
While the interest rate on bad credit loans is often higher and maximum loan amounts are often lower, it’s still possible to get a loan with reasonable terms—especially as there are now more companies than ever offering car loans for bad credit borrowers.
To help you narrow down your options, we’ve compiled a list of the best auto loans for bad credit. You can read about our top picks and other information about bad credit auto loans below.
On this page:
- Compare Bad Credit Auto Loans
- Where to Find the Best Auto Loans for Bad Credit
- Bad Credit Auto Loan FAQs
Compare Bad Credit Auto Loans
24 – 84 months
12 – 84 months
36 – 72 months
36 – 72 months
3.99% – 5.14%
Minimum Annual Income
24 – 72 months
Best Auto Loans for Bad Credit
Below you will find our choices for the best bad credit auto loans—including two marketplaces and three lenders—based on our Editorial Ratings. Scroll down or click a company name to jump to its review.
#1 Marketplace – CarsDirect
CarsDirect allows you to complete a form and request auto loan quotes within as little as 60 seconds. The process of getting quotes from dealers on car loans is simple and easy.
CarsDirect also provides tools to help you find and buy a vehicle, including details on dealer incentives. And unlike many bad credit auto loan lenders, there’s no minimum credit score requirement as long as you can provide proof of income.
Here’s what you need to know if you’re thinking about a loan from CarsDirect:
- Minimum income of $500 per week
- Repayment terms vary depending on credit history, vehicle year, and loan amount
- No minimum or maximum loan amounts
- Interest rates vary depending on credit history, down payment, and loan amount
- There’s no fee to apply for a loan.
- You can get a loan offer in 60 seconds.
- You can find financing options from various dealers.
- Online tools and educational information can help you to find a vehicle, explore discounts, and learn more about the car-buying process.
- You’ll need to complete the loan application process with the dealer you’re ultimately connected to.
- Many lenders receive your information so you may receive lots of marketing calls.
- Lenders must pay to be in the CarsDirect network, so you may not get access to smaller lenders or local lenders unwilling to pay the fee.
#2 Marketplace – RoadLoans
RoadLoans connects car shoppers to lenders that offer financing for new or used vehicles purchased from dealers. When you apply online, you’ll receive multiple offers so you can easily compare rates.
Approval is fast and simple, and RoadLoans promises that there are options for bad credit borrowers.
Loans are available for both new and used cars, and RoadLoans pairs with cars.com and Carmax to help you research and find the right vehicle for you.
- Minimum credit score of 550
- Repayment terms up to 72 months
- Minimum loan amount of $5,000 (or higher in Arizona, California, or Massachusetts)
- Maximum loan amount of $75,000
- Interest rates start at 1.99%, although they’ll likely be higher for bad credit borrowers
- You can get pre-approved for a loan before you shop, and you can get an instant decision within minutes on loan approval.
- There’s no application fee to apply for a loan.
- You can borrow for a new or used vehicle.
- RoadLoans recommends a cosigner for bad credit borrowers to get better interest rates.
- Multiple lenders will receive your information, so you may receive multiple promotional offers.
- You can only buy a car from a dealership, not from a private party.
#1 Lender – Capital One
Capital One makes it easy to pre-qualify for an auto loan online, and you have flexibility in loan terms ranging from 24 to 72 months.
There’s no minimum credit score required to qualify for a loan, but you do need to provide proof of a minimum income. Capital One also doesn’t require a hard credit inquiry for you to find out loan terms, which means you can shop around with this lender without hurting your credit.
- Repayment terms of 24 to 84 months
- Minimum loan amount of $7,500
- Flexibility in loan repayment terms
- No hard inquiry required to get pre-qualified
- No minimum credit score required
- No application fee to apply for a loan
- Certain vehicle models are excluded, including Oldsmobile, Suzuki, and Isuzu vehicles.
- You’ll need to complete your application at the dealer and a hard inquiry will be replaced on your credit report.
- You must buy your vehicle from a participating dealership. (There are around 12,000.)
>> Full Review: Capital One Auto Loans Review
#2 Lender – Auto Credit Express
Auto Credit Express has a simple secure form that takes just three minutes to complete and which will allow you to apply for loans from multiple lenders. There’s no minimum credit score requirement and you can access financing through a wide network of lenders and dealers.
- Minimum pre-tax income of $1,500 to $2,000 per month
- Minimum down payment of $1,000 or at least 10% of the car’s selling price, whichever is less
- Minimum debt-to-income ratio of 50%
- Minimum payment-to-income ratio of 20%
- Repayment terms range from 36 to 72 months
- No minimum or maximum loan amounts
- Interest rates vary by lender and are based on your credit, amount financed, down payment, and other factors
- You’ll have flexible repayment terms.
- Subprime borrowers can get quotes from multiple lenders to compare rates and find a loan they can qualify for.
- Car loans are available for new and used vehicles as well as for leased vehicles.
- Information is shared with multiple lenders, so you may receive multiple marketing calls and messages.
- Interest rates can be high, depending on the lender and your credit score.
- Down payments are typically required for subprime auto loan borrowers.
#3 Lender – MyAutoloan
MyAutoloan is another online marketplace that allows you to fill out one application and receive multiple loan offers from as many as 20 partner lenders, including loans for new and used cars, loans to buy from dealerships, and loans to buy from a private party.
You do have to meet minimum credit score and income requirements for some partner lenders, however.
- Minimum credit score of 500 is typically required
- Repayment terms ranging from 24 to 84 months
- Minimum loan amount of $8,000
- Maximum loan amount of $100,000
- Interest rates ranging from 2.49% to 25.00%
- Compare up to four offers within minutes.
- There’s no fees to apply.
- First-time car buyers can take advantage of helpful educational tools and resources.
- Car buyers can secure financing options for new and used vehicles, for private party purchases and for lease buyouts.
- The lender requires a hard credit check.
- Multiple lenders receive access to your information, so you may receive multiple ongoing offers after you’ve chosen your loan.
How We Chose the Best Bad Credit Auto Loans
To find the best bad credit auto loans, our Editorial Team analyzed the product’s APR (35%), loan terms (20%), BBB rating (15%), minimum and maximum borrowing limits (10%), states available (10%), application/origination fees (10%), and discounts (5%).
Learn more about our ratings and methodology here.
Bad Credit Auto Loans FAQs
How Does Bad Credit Impact My Ability to Get an Auto Loan?
Having bad credit will impact your auto loan differently depending on who your lender is. Here are some common options for auto loans, along with details about how bad credit will affect your ability to borrow:
If you’re considering getting financing from a car dealership, you should be careful. Many car dealerships are able to work with people with bad credit, but some push you into high-interest loans when you might be able to get a better deal elsewhere.
Some dishonest dealers will even try to get you into a loan that is designed to fail since they can then repossess the car later on and charge a big fee or penalty. If you’re thinking about getting a loan via a car dealership, be sure to shop around first to make sure that what they’re offering is a good deal compared to other bad credit car loans.
A Traditional Bank
Getting an auto loan from a traditional bank if you have bad credit will likely be difficult, if not impossible. That’s because traditional banks tend to be extremely conservative when it comes to their lending decisions. They often have high cutoffs when it comes to credit scores and income, and they have little ability to be flexible. If you want to borrow from a bank, you might need to get a co-signer.
A Credit Union
Credit unions can sometimes also have high credit score cutoffs, but they tend to be lower than what traditional banks offer. They are more likely to be flexible if you’ve been a member for a long time. They also often offer lower rates than other lenders for people who have high credit since they aren’t a for-profit company, but a non-profit membership organization. Just because your current credit union won’t lend to you doesn’t mean that there aren’t other credit union auto loans available. Make sure to shop around.
Can I Get Financing to Buy a Used Car from a Private Seller?
If you’re looking to buy a used car from someone off Craigslist or an ad posted on the grocery store’s bulletin board, it could be more difficult to find financing. Some lenders are less likely to finance cars bought from a private seller.
In fact, some lenders will charge you a higher interest rate on cars bought from individuals instead of dealers. It can sometimes be as much as two or three percent more—which can make a huge difference in terms of how much you pay over the life of your loan and how much you pay each month. Shop around to make sure that you get the best deal.
Can I Get a Cosigner?
It is absolutely possible to get a cosigner on an auto loan if you have bad credit. In fact, if your cosigner has good or excellent credit, it might result in you getting approved when you would otherwise be rejected or allow you to get better terms or a lower interest rate.
Can I Get Pre-Approved Before Going to a Dealership?
It isn’t just possible to get pre-approved for a car loan before going to a dealership, it actually makes a lot of sense to do so. That’s because the last thing you want to do is get your heart set on a car that is way outside your price range. That’s why it’s better to know how much you can get approved for before you head out shopping.
Another reason why it makes sense to get pre-approved is that you’re less likely to get caught up in the excitement of car shopping or the discounts that the salesperson tells you are “today only” and opt for a loan offered by the dealership. If you don’t know what’s a good rate, you could be talked into taking on a loan that is more expensive than you might qualify for elsewhere. For that reason, knowing that you have been pre-approved will give you the power to act quickly if you need to without having to get a dealership loan.
Getting pre-approved is relatively easy. If you’re applying to a lender that has an online pre-approval application, all you have to do is answer a few questions about yourself and your finances. They’ll then give you a quote for how much you’re likely to qualify for. You can also do this with banks or credit unions by going into their branch and filling out an application or filling out their online applications.
One thing to keep in mind, however, is that some lenders will do a hard credit check when they pre-approve you for an auto loan. That could greatly impact your credit score, because it will show up on your credit history as a credit inquiry. Each credit inquiry causes your score to go down a little bit, so you either want to look for lenders who will pre-approve you with a soft credit check that doesn’t affect your credit score or get fewer pre-approvals.
If you do plan to get pre-approved, you should know that sometimes the amount and rate can change once they finalize your loan application. You could end up not being able to borrow as much or having to pay significantly more than you thought in interest. The lender might also decide after conducting a hard credit check or reviewing your application not to lend to you at all.
Can I Get a Bad Credit Car Loan if My Car Has Previously Been Repossessed?
If you have had a car repossessed in the past, it could still be possible to get an auto loan, but it might make it more difficult. If your car is repossessed, that goes on your credit history and will stay there for seven years. If it’s been seven years, that item should have aged off of your credit report, so you’ll be more likely to get a new car loan. If it’s been less than seven years and the repossession is still on your credit history, it will likely be much more difficult to get an auto loan. However, that does not mean that it’s impossible.
If you have built up your credit since the repossession, you might be able to get a lender to take a chance on you. You can also increase your chances of getting an auto loan if you get a co-signer who has better credit than you.
Finally, there are lenders that specialize in giving auto loans for bad credit. These lenders might be willing to lend to you if you’ve had a previous car repossessed. However, they might look at your income more closely and things like your debt-to-income ratio before deciding to lend to you. If the repossession recently occurred, you will be less likely to convince a lender to give you a new loan unless there were significant mitigating factors.
You also might not be able to borrow as much as you would like, and you will almost definitely have to pay a significantly higher interest rate on your auto loan than someone who doesn’t have a repossession on their credit history. That’s because the lender must price into their interest rate the risk that you’ll default again.
Is It Possible to Get a Better Auto Loan After My Credit Score Improves?
If you have bad credit, you might think that your only option is to take out an auto loan with a high interest rate and pay it off completely. Fortunately, that’s not the case. In fact, if your credit score has improved, you can save hundreds or even thousands of dollars by refinancing your auto loan at a lower interest rate.
This is a common situation. After all, if you take out an auto loan and pay it off faithfully and on time, then your credit score is likely to improve based on that good behavior. Good credit behavior with the rest of your credit accounts could also influence your score, as could the fact that time passing means that credit events will fall off your credit history.
If your credit has improved significantly, you can always try to get a quote and see how much you would be likely to save if you pursue an auto loan refinance, a debt consolidation loan, or a personal loan. Even if you can just shave off a couple of percentage points from your loan, you’re likely to come out ahead and reduce your monthly payments significantly. If you choose loans that have few or no fees, there shouldn’t be any costs to taking out a new loan, which means you can refinance more than once as your credit score continues to improve.
How Do I Avoid Scams and Predatory Offers?
Scammers flock to people who are desperate. Many people who have poor credit scores and are searching for a car loan are doing so because they need a car—often it’s the only way they’ll be able to get to work. For that reason, they are less likely to do their due diligence when they hear that a lender is willing to help them buy a car at a reasonable rate. But if it seems too good to be true, it likely is.
Many scammers advertise auto loans without credit checks, which can be a big red flag. Few reputable lenders will offer you an auto loan without a credit check. Many of these fake lenders request an upfront fee for your loan or an application fee. While many of these lenders don’t actually give out loans, others do but will only provide you with a loan with enormous interest rates and all kinds of hidden fees that add up quickly.
Your best bet for avoiding scams and predatory offers is to only get quotes from reputable lenders who have high ratings with the Better Business Bureau or other similar organizations like Trustpilot.
Since some scammers are looking to get your personal information, including your Social Security number, also be wary of e-mails that you might get about promotional deals, as they could be phishing scams designed to look like they come from reputable lenders. Navigate to the lender’s site via a search engine rather than an e-mail link.
>> Read More: Best auto loans
Author: Christy Rakoczy