How To Get Car Loan With Bad Credit

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How To Get Car Loan With Bad Credit – Having a low credit score can make it hard to get a car loan from a traditional lender. Lenders are also getting stricter with their lending rules, which make it even harder for people with bad credit to get an auto loan.

How To Get Car Loan With Bad Credit

But don’t give up and go for a high-cost loan from a “buy here, pay here” dealer just yet. With a little effort, you can find the best car loans for bad credit that fit your financial situation.


Don’t let a low credit score bring you down! You can still find a good car loan deal by doing some research and taking the right steps:

Check Your Credit Score:

 Before applying for loans, know where you stand. FICO scores below 580 are considered poor. Things like late payments, high credit utilization, and a short credit history can bring your score down.

Save Up For A Down Payment

 To secure better loan terms, save up for a down payment before applying. Know your budget and what interest rate you can expect based on your credit score. Ideally, your car payment should be no more than 10-15% of your take-home pay.

A down payment can lower your monthly payments and increase your chances of approval, especially if your credit score is low. Putting more money down can help balance out higher interest rates and make your loan-to-value ratio more favorable.

While it’s generally better to make a larger down payment, some lenders may accept as little as $1,000. By saving up for a down payment, you can improve your loan terms and better manage your car expenses.


Do your homework to be ready when it’s time to negotiate your car loan. With a low credit score, you might be offered high interest rates, so it’s essential to know what to expect.

According to Experian, people with subprime credit (FICO score between 501 and 600) may get an average interest rate of 12.85% for new cars and 18.97% for used cars. Knowing these rates can help you determine if you’re being offered a fair deal.

Also, research the Kelley Blue Book (KBB) value of the used car you want or the MSRP for a new car. This information gives you a better idea of the car’s worth, helping you negotiate a fair price.

Shop Around

When you’re ready to get a car loan, shop around for the best rates. Don’t just go with the first lender you find; compare multiple options:

  • Banks and credit unions: Start with your bank or credit union. They may offer lower rates to their customers and might be more willing to work with you if you have a good banking history.
  • ¬†Online lenders: Many online lenders let you prequalify to see what terms you could get. Some consider factors like your job history or education in the application process.
  • Car dealerships: If you can’t get a loan elsewhere, dealerships are an option, but their rates may be higher since they want to make money.
  • ¬†Buy-here, pay-here dealerships: If other lenders won’t approve you, these dealerships might. However, they often come with high interest rates, so be cautious.

Comparing rates and terms from different lenders helps you find the best loan for your situation, potentially saving you money in the long run.

Frequently Asked Questions

What Credit Score Do I Need To Get A Car Loan?

Credit requirements vary by lender, but generally, a score above 660 is considered good. However, some lenders specialize in bad credit loans and may approve scores as low as 500.

How Can I Improve My Chances Of Getting A Car Loan With Bad Credit?

To increase your chances of approval, save for a larger down payment, show steady income, and improve your credit score if possible. Consider using a cosigner or opting for a less expensive vehicle.

Where Can I Find Car Loans For Bad Credit?

Banks, credit unions, online lenders, and car dealerships are all potential sources for bad credit car loans. It’s essential to compare rates and terms from multiple lenders to find the best deal.

Are Buy-here, Pay-here Dealerships A Good Option For Bad Credit?

Buy-here, pay-here dealerships can be an option if you can’t get approved elsewhere. However, they often come with high interest rates, so use caution and consider other options first.

How Much Will A Bad Credit Car Loan Cost Me?

Interest rates on bad credit card loans can be high, sometimes exceeding 20%. Use a car loan calculator to estimate your monthly payments and total interest costs.

Can I Refinance My Bad Credit Car Loan Later?

Yes, refinancing your car loan once your credit improves can help you secure better rates and terms, potentially saving you money.

What Should I Do If I’m Having Trouble Making My Car Loan Payments?

If you’re struggling to make your car loan payments, contact your lender as soon as possible. They may be able to work with you to modify your loan or create a payment plan to help you avoid defaulting or having your vehicle repossessed.

How Can I Avoid Scams When Getting A Bad Credit Car Loan?

Be cautious of lenders that guarantee approval without checking your credit or require upfront payments before loan approval. Always research the lender and read reviews to ensure they’re reputable and trustworthy.

Can I Get A Car Loan With No Credit History?

Yes, it is possible to get a car loan with no credit history, but it can be challenging. Some lenders offer first-time buyer programs, or you can consider a cosigner or provide alternative credit data, like rent and utility payments, to demonstrate your financial responsibility.