Get a bad-credit car loan today Loan type
Written by Amanda Push, revised on January 12, 2024 by Katie Lowery.
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| Lender | Starting APR | Loan terms | Loan amounts | Best for… |
|---|---|---|---|---|
| 7.90% | Not disclosed | Not disclosed | Auto refinancing | |
| 6.85% | 36 to 78 months | Starting at $1,000 | Online car buying | |
| 7.90% | Not disclosed | Not disclosed | Borrowers with no credit | |
| 6.49% | 36 to 72 months | Starting at $4,000 | Preapprovals |
See our methodology for selecting the top car loans for borrowers with bad credit.
Bad credit auto loans at a glance
- Starting APR: 7.90%
- Repayment terms: Not disclosed
- Loan amounts: Not disclosed
| Pros | Cons |
|---|---|
|
Competitive refinancing rates No application fees Option to apply with co-borrower |
Only offers refinancing May need to fax some of your loan paperwork Extra verification documents needed if youre self employed |
One of the most well-liked refinancing companies for people with bad credit on the LendingTree platform in the first quarter of 2023 was OpenRoad Lending, which specializes in auto refinancing. Borrowers using this lending platform must make at least $1,500 in gross monthly income.
OpenRoad allows you to refinance a car loan, but the vehicle must be less than eight years old and have less than 140,000 miles on it.
Best for online car-buying
- Starting APR: 6.85%
- Repayment terms: 36 to 78 months
- Loan amounts: Starting at $1,000
| Pros | Cons |
|---|---|
|
Process is completely online Option to apply with cosigner Offers autopay discount |
Down payment required Auto loan can only be used on Carvana platform History of legal troubles |
In the first quarter of 2023, Carvana topped the LendingTree auto loan marketplace in terms of popularity. Unfortunately, a Carvana auto loan can only be used on the e-commerce platform and cannot be used for any kind of car. However, Carvana takes into account all credit profiles and permits cosigners for auto loans if you’re shopping for a used car and credit is a concern.
Regrettably, Carvana has been in the news recently due to legal issues; several states have fined the company or even suspended its license.
Best for borrowers with no credit
- Starting APR: 7.90%
- Repayment terms: Not disclosed
- Loan amounts: Not disclosed
| Pros | Cons |
|---|---|
|
Offers financing to borrowers with no credit Can reserve a car for up to seven days Reports to all three major credit bureaus |
Borrowing limits aren’t specified Doesn’t allow you to negotiate on car prices No at-home delivery options |
DriveTime still provides financing options that might be suitable for you, even if you don’t have much or any credit history. Additionally, as long as you make your payments on time, DriveTime reports to all three major credit bureaus, which can help you establish a credit history and raise your credit score.
However, DriveTime does not allow you to haggle over the price of the car you wish to buy because it offers no-haggle pricing. Even though this might be good news for buyers who don’t enjoy haggling, you might have to pay a little bit more than you would at a conventional dealership.
- Starting APR: 6.49%
- Repayment terms: 36 to 72 months
- Loan amounts: Starting at $4,000
| Pros | Cons |
|---|---|
|
Can get preapproved or prequalified online Auto Navigation tool can help you stay within your budget as you shop for a new car Co-applicants allowed |
Must purchase from a participating dealership Does not finance private party sales No lease buyouts |
Although Capital One does not make public its minimum credit score, internal LendingTree data indicates that it may still approve you if your credit isn’t perfect. It provides auto loans that are preapproved and usable at any of the 12,000 participating dealerships.
The bank’s Auto Navigation tool is also handy. It requires prequalification and the Auto Navigation app download in order to use. After that, you can shop for a new or used car using the app. The app will display personalized estimated payments while you shop, based on the data you provided during prequalification.
How we chose our picks for bad-credit auto loans
A regular auto loan from a lender willing to work with borrowers who have low credit scores is what’s known as a bad-credit auto loan. In the second quarter of 2023, we looked at thousands of applications for bad-credit auto loans from people with FICO scores of 619 or lower in order to help you sift through the competition and get the best rate. These four companies provide borrowers with FICO scores below 620 with a wide range of terms, flexible loan amounts, and preliminary decisions in as little as a few minutes.
How to get a car loan with bad credit
You may be aware that you have bad credit, but do you really know your current credit score? Before applying for an auto loan, it’s a good idea to find out your exact credit score because it can fluctuate over the course of a few days or even hours. It will cost you more to get a car loan than it would for someone with excellent credit if your credit score is lower because of higher interest rates and other associated costs.
Make sure there are no mistakes on your credit report if your score seems unusually low. You can check your credit report at AnnualCreditReport to obtain reports from each of the three major credit reporting agencies. com. Additionally, by getting in touch with the bureau(s) directly, you can contest any inaccuracies found in your credit report.
Apply to multiple lenders
Purchasing a car with bad credit can be costly, so it’s crucial to compare prices and don’t accept the first offer you receive. This could save you money on interest and fees.
FICO Score and VantageScore allow consumers to rate shop. This implies that any applications you submit between 14 and 45 days from now will only appear on your credit report as one hard credit inquiry. Additionally, though not all lenders provide this option, you can see potential rates, terms, amounts, and fees without having an impact on your credit by seeing if you can prequalify for a loan.
Average car loan rates by credit score
| Credit score | Used | New |
|---|---|---|
| 300-500 | 21.18% | 14.17% |
| 501-600 | 18.39% | 11.86% |
| 601-660 | 13.53% | 9.29% |
| 661-780 | 9.33% | 6.88% |
| 781-850 | 7.43% | 5.61% |
*Source: Experian Q3 2023 data
As you can see, people with the lowest credit scores typically pay the highest interest rates, which over the course of an auto loan can result in additional thousands of dollars in interest charges. Because of this, it’s crucial to confirm that you receive an offer straight from a lender. Dealers frequently profit by inflating your annual percentage rate (APR), which is the total of your interest rate and other costs.
Start with your own bank, credit union or online lender. Next, contrast those offers with those you get from sites like the LendingTree marketplace, where you can submit a single form and, based on your creditworthiness, get up to five loan offers from lenders.
Increase your chances of getting approved
Instead of waiting until your credit score rises if you urgently need a car loan, take into account these four options:
Find a cosigner. Get a good credit cosigner who you trust and who believes in you to cosign your auto loan. They guarantee to repay the loan should you default by cosigning it. By using a cosigner, you might be eligible for a lower rate because the lender might view the loan as less risky.
Consider buying a car with cash. You could be able to purchase a used car for the same down payment as a new one because they are less costly than new ones. Additionally, there won’t be a credit check required if you pay cash for your car.
Buy from a private seller, not a dealer. Used cars from private sellers can be financed with cash or through a private party auto loan, and they usually cost less than cars from dealers.
Use a personal loan. Certain personal loans, especially secured loans, can be used to buy cars and don’t require good credit. However, exercise caution as rates may equal or surpass those of a bad-credit auto loan.
There is no minimum credit score required by the industry for auto loans because every lender has different requirements. However, in order to be eligible for APRs under 2010 percent, you will need to have a credit score of at least 601% for a new car and 6611% for a used car.
There are various kinds of auto lenders to pick from, just as there are various kinds of auto loans:
- Credit unions: With annual percentage rates (APRs) capped at 2018, a credit union car loan could save you money on interest and fees, particularly if your credit isn’t the best. But bear in mind that in order to be eligible for a loan in the end, you must become a member.
- Banks: Similar to credit unions, banks typically offer low fees and interest rates. However, it could be challenging to be approved for a bank auto loan if your credit isn’t good or exceptional.
- Online lenders: Compared to dealer financing, credit union, bank, or online lending, the application process for online loans is completed remotely, which can save time. Additionally, despite the possibility of higher interest rates, they might be more accommodating to borrowers with poor credit.
- Captive (dealer) financing: Getting your car loaned through a dealer can speed up the process, but the interest and other costs could go up. Numerous automakers, such as Ford and Toyota, have lending divisions within their companies that provide internal financing for their cars. Automobile purchasers frequently have access to promotional financing offers, such as 200 percent annual percentage rate auto loans.
It’s crucial to compare auto loan offers carefully, paying close attention to the interest rates, terms, amounts, fees, and monthly payments. The amount you will pay back over the course of the loan will depend on these details. When comparing loans, you should also take other factors like the required down payment and any prepayment penalties into account.
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FAQ
Can you get a car loan with a 500 credit score?
Even with a 500 credit score, you can still obtain a car loan, but it will be expensive. Individuals whose credit scores were 500 or below were assigned an average rating of 14. 08% for new-car loans and 21. 32% of used-car loans were made in the first quarter of 2020–2023, as per the report by the Pearson State of the Automotive Finance Market.
What is the lowest credit score to get a car loan?
The majority of borrowers who apply for used auto loans have credit scores at least 675. Most borrowers with new auto loans have scores of about 730. A new car may require a minimum credit score of about 600, but excellent credit frequently results in lower rates and monthly payments.
Read More :
https://www.lendingtree.com/auto/bad-credit/
https://www.cnbc.com/select/best-car-loans-for-bad-credit/