Best Bad Credit Car Loans for 2020

Having a bad credit score can make an auto loan seem out of reach. While your credit score is one of the primary factors lenders consider, a bad credit score shouldn’t discourage you from applying. You can still find an auto loan that you can afford, though buying a car with bad credit means you’ll pay higher APRs and face tighter restrictions. We’ve assessed the best lenders for low-credit borrowers with our proprietary SimpleScore methodology by evaluating each lender’s rates, terms, customer satisfaction, customer support and fees.

Lending Partner
Min. Loan
Fixed APR
Term
  • PenFed
    Min. Loan
    $500
    Fixed APR
    Starting at 1.39%
    Term
    36–84 months
    LEARN MORE
    on lender’s secure website
  • MyAutoloan
    Min. Loan
    $7,500
    Fixed APR
    3.49%–21.08%
    Term
    24–72 months
    LEARN MORE
    on lender’s secure website
  • CarsDirect
    Min. Loan
    N/A
    Fixed APR
    3.00% – 12.90%
    Term
    24 – 72 months
    LEARN MORE
    on lender’s secure website
  • Auto Credit Express
    Min. Loan
    N/A
    Fixed APR
    N/A
    Term
    24 – 72 months
    LEARN MORE
    on lender’s secure website
  • Auto Credit Express
    Min. Loan
    N/A
    Fixed APR
    N/A
    Term
    24 – 72 months
    LEARN MORE
    on lender’s secure website
  • CarsDirect
    Min. Loan
    N/A
    Fixed APR
    3.00% – 12.90%
    Term
    24 – 72 months
    LEARN MORE
    on lender’s secure website
  • MyAutoloan
    Min. Loan
    $7,500
    Fixed APR
    3.49%–21.08%
    Term
    24–72 months
    LEARN MORE
    on lender’s secure website
  • PenFed
    Min. Loan
    $500
    Fixed APR
    Starting at 1.39%
    Term
    36–84 months
    LEARN MORE
    on lender’s secure website
  • Penfed
    Min. Loan
    $500
    Fixed APR
    Starting at 1.99%
    Term
    36–84 months
    LEARN MORE
    on lender’s secure website
  • MyAutoloan
    Min. Loan
    $7,500
    Fixed APR
    3.49%–21.08%
    Term
    24–72 months
    LEARN MORE
    on lender’s secure website
  • PenFed
    Min. Loan
    N/A
    Fixed APR
    N/A
    Term
    N/A
    LEARN MORE
    on lender’s secure website
In this article

    The 5 best bad credit auto loans for 2020

    Bad credit auto loans at a glance

    LenderNew Car APRTermsMinimum LoanMaximum Loan
    Auto Credit ExpressVariesMatch current loan or extend it by 12 monthsNone$55,000
    LendingClub3.99%–24.99%Match current loan or extend it by 12 months$5,000$55,000
    Capital One2.99%–24.99%24–84 months$4,000$50,000
    Carvana3.90%–27.90%72 monthsN/AN/A
    MyAutoLoan3.49%–21.08%24 or 72 months$8,000N/A

    Best bad credit auto loans

    Best for money down – Auto Credit Express

    Like a switchboard operator, Auto Credit Express isn’t where you’ll get your loan, but they’ll connect you to who you need.

    Loan Amount
    N/A
    APR Range
    N/A
    Term
    24 – 72 months
    SimpleScore
    N/A / 5.0
    close
    SimpleScore Auto Credit Express N/A
    Rates N/A
    Loan Size N/A
    Used Car Rate N/A
    Terms N/A
    Fees N/A

    Working with all credit levels, Auto Credit Express is perfect for those who are having a hard time qualifying. Auto Credit Express doesn’t offer loans directly. Instead, it will connect you with its network of approved lenders. With one of the best reputations for borrowers with poor credit, Auto Credit Express’s quality is echoed by excellent customer reviews. Even if there’s a bankruptcy on your record, Auto Credit Express can help you secure a loan. To lock in a loan with Auto Credit Express, you must be employed full time or have a guaranteed fixed income of at least $1,500 a month.

    Like many online comparison sites, Auto Credit Express will not approve loans that go through private sellers, you must use a lender within their network. It will automatically match you with a local dealer so that you can find the right vehicle for your needs and budget

    Auto Credit Express Disclosure
    • Bad Credit Auto Loans
    • $5,000 to $45,000 Approvals
    • No Credit Rejected
    • Get Financing for a New or Used Car
    • Apply & Drive Today!

    Best for auto refinancing – LendingClub

    With no origination fees, LendingClub is the Millenium Falcon of auto refinance loans. You’ll have your offer fast, just maybe not in less than twelve parsecs.

    Loan Amount
    up to $55,000
    APR Range
    3.99%–24.99%
    Term
    up to 60 months
    SimpleScore
    4.4 / 5.0
    close
    SimpleScore LendingClub 4.4
    Rates 4
    Loan Size 5
    Used Car Rate 5
    Terms 4
    Fees 4

    Focusing on refinanced auto loans, LendingClub helps borrowers lower their monthly payments or adjust their interest rate. But you should look elsewhere if you’re shopping for a new car, LendingClub does not offer traditional auto loans. To pursue a refinanced loan with LendingClub, your vehicle must be less than 10 years old with fewer than 120,000 miles. Additionally, your current loan must have a balance of between $5,000 and $55,000 and at least 24 months left in its term. This means that work vehicles, such as with an employer or for a business owner, are not eligible.

    While it does offer some of the lowest car loan rates for those with good credit, interest rates can increase to as high as 35.89% if you have poor credit. Applicants with poor credit who have a cosigner might have a better chance of getting approved for this loan as well as a lower interest rate. With an easy online application, you can get your refinancing offer within minutes. In fact, you may have the funds in your bank within seven days of approval. But, LendingClub is only available in 35 states.

    Best dealerhsip network – Capital One

    If you’ve seen Donnie Darko, then you already know what it’s like to get an auto loan from Capital One –– misleading and sometimes frustrating

    Loan Amount
    up to $50,000
    APR Range
    2.99%–24.99%
    Term
    24–85 months
    SimpleScore
    4.4 / 5.0
    close
    SimpleScore Capital One 4.4
    Rates 4
    Loan Size 4
    Used Car Rate 5
    Terms 5
    Fees 4

    Capital One allows borrowers to secure auto loans and refinance existing ones. With tools like auto loan calculators and a network of over 12,000 eligible dealers, this lender has a lot to offer. To qualify, borrowers must have a minimum monthly income of $1,500 to $1,800, and the vehicle purchased must be a 2009 or later model with less than 120,000 miles. Capital One will pre-qualify you without a hard credit check, but you’re limited to using the loan at only their partnered dealerships.

    While the online pre-approval tool is easy to use, it can be misleading. Preapproval doesn’t explicitly translate into a loan approval. You can go through the pre-approval and car searching process, find a vehicle that works for you, only to discover that you don’t qualify for the loan. Frustrations like these may have contributed to Capital One’s poor customer satisfaction rating, gaining only two out of five stars from 170 reviews in 2019.

    Best customer satisfaction – Carvana

    Completely online, you can shop for a car from the comfort of your home. It’s like ordering take out, but with a way longer payment process.

    Loan Amount
    Varies by state
    APR Range
    3.90%–27.90%
    Term
    36–72 months
    SimpleScore
    4 / 5.0
    close
    SimpleScore Carvana 4
    Rates 3
    Loan Size N/A
    Used Car Rate 4
    Terms 5
    Fees 4

    Carvana is an online retailer, meaning you can shop for cars right from the comfort of your home. Prequalification happens before you begin your search, which is a major timesaver for prospective buyers. The terms and conditions are valid for 45 days, leaving you with plenty of time to shop around and make the best choice. The down payment required will depend on the car, your credit score and loan term.

    Another upside is that there is no minimum credit score to qualify with Carvana, however you can’t have bankruptcies on your record and you must make at least $10,000 annually. Another catch is that loan pre-approvals can not be used for purchasing vehicles outside of Carvana’s network. But if you have some financing available through a third-party such as a bank or credit union, that loan can be combined with the financing received through Carvana.

    Best for multiple loan offers – MyAutoloan

    If you’re certain that you need as many loan offers as you can get and don’t mind a hard credit pull, repeat after Yoda, “Do, or do not.” There is no try with MyAutoloan.

    Loan Amount
    Minimum $7,500
    APR Range
    3.49%–21.08%
    Term
    24–72 months
    SimpleScore
    5 / 5.0
    close
    SimpleScore MyAutoloan 5
    Rates 5
    Loan Size N/A
    Used Car Rate 5
    Terms 5
    Fees 5

    Like other picks on our list, MyAutoloan offers a range of car loan options, including new-car, used-car and refinance loans. If you’re thinking about applying with this lender, keep in mind that credit scores of 500 or higher are a requirement to qualify, so expect a hard credit pull or being contacted by multiple companies. But don’t be discouraged by the minimum credit score because, as a marketplace, MyAutoloan will allow you to shop around for rates that benefit your situation.

    Once you apply, as many as 20 lenders get to see your application and respond within a short time, sometimes less than two minutes. The offers can last up to 30 days, and you’re not obligated to accept. Another thing you should consider is that the minimum loan amount you can borrow is $8,000 and the maximum amount will depend on factors like your credit history, income and the amount you request.

    MyAutoloan Disclosure
    • You and/or co-qualifier must be at least 18 years of age; Minimum income: for Purchase, Private Party and Lease Buyout loan types, $21,000 Gross Yearly Income; for Refinance loan type, $18,000 Gross Yearly Income
    • Lives in a state where we are currently doing business, (we are in 48 states, not in Alaska or Hawaii) – Minimum Vehicle Requirements: 125,000 maximum mileage; 10 years old or newer
    • Minimum Loan Amount: for Purchase, Private Party and Lease Buyout loan types, $8,000; for Refinance loan type, $5,000
    • FICO scores of 575 or greater
    • Applicant has not submitted a loan offer form in the past 31 days for the same loan type
    • Customers intent when submitting the loan offer form was to finance a new or used vehicle or refinance an existing vehicle

    What is a bad credit auto loan?

    Offered by online lenders, banks or credit unions, auto loans allow you to finance your car. Once you take out the loan, you repay your lender through monthly payments plus interest and any additional fees. A bad credit loan is the same as a traditional auto loan but tailored to your credit score. FICO scores are basically the GPA for your credit rating. Many factors contribute to your credit score, including payment history (whether you pay bills and loan payments on time and in full), debt-to-income ratio, age of credit accounts and the number of new account inquiries. A low credit score makes you a risky investment for traditional banks or loan agencies, though you still have options in non-traditional loans.

    There are three factors that influence your loan and how much you’ll end up paying over time.

    1. Total loan amount – How much you need to borrow.
    2. Loan terms – Set by the lender, your loan term specified how long you’re set to repay your loan and how much your monthly payments will be.
    3. APR – Annual percentage rate is an evaluation of the affordability of the loan. It includes both the interest rate of the loan and any additional fees you pay.

    If you don’t need a car immediately, keep in mind that there are things that you can do to improve your credit score before shopping for a vehicle. For buyers with a lower credit score, bad credit loans are available for non-vehicle financing.

    Check Your Personal Loan Rates

    Answer a few questions to see which personal loans you pre-qualify for. It’s quick and easy, and it will not impact your credit score.

    Get Started

    with our trusted partners at Bankrate.com

    How bad credit auto loans work

    The first thing you should know is: auto loans are secured loans. This means if you fail to make your payments on time, you’ll lose your car. Applying for a loan with lenders means you’ll have to prove your ability to repay the loan and give the lender access to your credit history and other financial information. Don’t let the process surprise you. Gather all of your important financial information — pay stubs, existing loan and asset information — to make sure you’re prepared.

    Regardless of whether you go through a bank, credit union or an online lender, once you’re approved you’ll receive a lump sum for your car purchase. Then, you pay back your loan to the lender, with interest, over the term of your loan.

    How much you’ll pay each month will be determined by the loan amount, loan term and APR. Once you know your monthly payments, make a budget to make sure you’ll never fall behind. Making your payments on time will improve your bad credit and open up the possibility of refinancing. Refinancing an auto loan allows you to qualify for a lower interest rate and adjust your monthly payments.

    Pros and cons of an auto loan with bad credit

    A bad credit score will undeniably limit your options for the best auto loans. But that doesn’t mean you can’t buy a car with bad credit. A car loan can have a positive impact on your credit score if managed correctly. However, if you fail to make your monthly payments, it can damage your credit even further. Before you take out an auto loan, think about the pros and cons, so you know what you’re signing on for.

    ProsCons
    No extra collateralRisk of losing a car due to missed payments
    Car ownership over lease termSkipped or missed payments affect credit scores
    On-time payments help increase credit scoresBad credit car loans mean higher APRs and tighter restrictions
    Option to refinance with good credit scoreVehicle will depreciate over the term of the loan

    When to use an auto loan for bad credit

    If you can afford it, an auto loan is a good way to buy a car — even if your credit score is lacking. Undeniably, a bad credit auto loan will mean higher interest rates and fewer choices. Though if you have compared your options and planned your repayment, an auto loan can be beneficial.

    Bad credit auto rates don’t have to be permanent. If you make your payments on time (or make extra payments if you can afford it), your credit score will increase and you can potentially refinance your loan. Refinancing a loan will allow you to find a lower interest rate and save money in the long run.

    When to avoid an auto loan for bad credit

    You should avoid even the best auto loan for bad credit if you cannot afford to pay it back. Signing on for a loan you cannot reasonably afford will damage your credit if you fall behind on your payments. Don’t be swayed by the “great” deals that require zero down and a seemingly reasonable monthly payment.

    By the end of your term, you’ll probably have paid more than the car was worth because of a high interest rate. Don’t focus only on the monthly payment when shopping around; consider all the terms, fees and interest charges.

    Especially if your credit is lacking, you might want to jump at any car loan that comes your way. But it’s essential that you examine the terms of the loan, making sure to avoid any predatory auto loan practices — like yo-yo sales, auto loan markups and loan packing.

    How is auto loan interest calculated?

    Interest is one of the main ways lenders earn a profit. The best bad credit auto loan rates vary and change daily. So getting prequalified before looking for a car will give you a better idea of what you should expect for interest. Auto loans are amortized and paid back with simple interest, which means you pay back the money borrowed plus a flat percentage rate.

    Let’s say you borrow $35,000 for a term of 36 months at an interest rate of 11%. In this scenario, your estimated monthly payment will be $1,146, and over the term of the loan (36 months), you’ll pay $6,251 in interest.

    If you take out the same $35,000 loan for 36 months at an interest rate of only 5.5%, your monthly payments will be $1,057, and you’ll only pay $3,047 in interest.

    How to choose the best auto loan for bad credit

    Step 1: Improve your credit score (if you can)

    Before you start looking for an auto loan, the first step is getting a hold of your credit report and checking it for errors. Blunders on your credit score can negatively impact your credit score and can take up to 30 days to dispute, so being proactive is essential. Once you have a clear picture of where you stand on the credit spectrum, work towards improving it.

    • Ask for a credit limit increase — You may want to ask for a credit limit increase on an existing account a few months before shopping for a car. This improves your debt-to-credit ratio and, in many cases, will impact your credit score — at least temporarily.
    • Make current loan payments on time — Your track record for payments is one of the most critical elements that make up your credit score. It’s also one of the best ways to boost it.
    • Reduce debt — Focusing your efforts on reducing debt as much as possible will improve your credit utilization ratio and simplify your finances. Not only will reducing debt make new payments more manageable but will increase your score. Find ways to cut your spending and use that excess to make additional payments toward your existing balance.

    Step 2: Create a budget

    You have to know what you can reasonably afford. Entering into a loan that you can’t repay is a financial misstep you may not recover from. Take a look at all of your spending and decide what you can eliminate and what you can’t live without. Don’t overestimate how much you can commit to saving each month; be realistic about your financial situation. Creating a budget eradicates the unknowing of how much of a loan you should take out.

    Step 3: Shop around

    A bad credit score can make getting a car loan tricky, but that doesn’t mean you have to settle for whatever rate comes your way. You don’t need to limit yourself to one lender. Rates will vary across granters, so take the time to do some research and compare options. Getting prequalified will get you rates from lenders, but they are subject to vary since they are only based on a soft credit pull.

    Check Your Personal Loan Rates

    Answer a few questions to see which personal loans you pre-qualify for. It’s quick and easy, and it will not impact your credit score.

    Get Started

    with our trusted partners at Bankrate.com

    Step 4: Review and finalize loan

    You don’t have to jump at the first offer that comes your way, and you should always compare options. Look at the loan term as a whole, not just the monthly payment. A lower monthly payment will mean more interest over time. If you’re not careful, you could end up paying more than your car is worth. You’re always looking for the most favorable terms, though remember to be realistic about how much you can afford to repay each month. When your loan is finalized, immediately plan how you’re going to repay it.

    Auto Loans FAQ’s

    Too many checks in a short period of time are not ideal. Try to get a preapproved bad credit auto loan before visiting a car dealership. They often run your credit through several vendors to get approval, and this will only weaken your credit, making auto loan financing difficult.

    Yes. Lenders may be more willing to approve an application if you have a qualified cosigner. You’re also more likely to receive a lower interest rate or a larger loan with the help of a cosigner.

    One of the best ways to build your credit is to make debt payments on time. In addition to paying off high-interest balances, try not to take on any extra debt if you’re attempting to improve your score.

    It depends on the lender. Most often, lenders will look at employment history when approving you for a loan. However, the biggest consideration is your credit score. If you have a long employment history and good credit, you may qualify for a personal loan. But, it may have to be secured by collateral so your lender knows it will be paid back. Visit Emergency Loans for the Unemployed to learn more.

    We welcome your feedback on this article and would love to hear about your experience with the personal loans we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.

    The impact of COVID-19 on bad credit auto loans.

    Protecting your credit score is essential to your financial success. But in the wake of the economic uncertainties surrounding the Covid-19, it’s more important than ever. In April, major credit bureaus, Equifax, Experian and Transunion made a joint decision to offer free weekly credit reports for the next year to help people manage their credit during the pandemic. Likewise, credit counseling agencies are also offering help to people affected by Covid-19. The National Foundation for Credit Counseling (NFCC), for example, is allowing people to receive free credit guidance from a nonprofit credit counselor.

    Methodology

    SimpleScore

    We’ve created the SimpleScore™ to help you objectively compare products and services here at The Simple Dollar.

    Our editorial team:

    • Identifies five factors to compare across each brand
    • Determines the rating criteria for each factor
    • Calculate an average of those five factor scores to get one SimpleScore™

    We break down each of these five factors and their rating criteria for our review of the best auto loan companies of 2020.

    Why do some brands have different SimpleScores™ on different pages?

    Some brands like Bank of America, Wells Fargo, and Chase have different SimpleScores™ because they offer more than one financial solution — like auto loans, home loans, personal loans and banking.

    For instance, in our Bank of America Mortgage Review, we give the company a 3.8 out 5 based on our five rating factors for mortgages. In our Bank of America Auto Loans Review, we give the company a 4.4 out of 5 based on our rating factors for auto loans. By tailoring our SimpleScore™ to each financial solution, we’re able to give you a more accurate view of their services and how they compare to competitors’ services.

    Minimum new car rate

    Companies that look out for new car buyers with lower rates receive higher scores from us.

    Minimum used car rate

    We also give higher ratings to companies that look out for used car buyers by offering lower rates.

    Maximum loan size

    Having enough money to cover your auto loan is important –– that’s why companies with higher maximum loan amount receive better scores from us.

    Customer satisfaction

    We use the J.D. Power 2019 Consumer Lending Satisfaction Study℠ to find out how customers rate their experience with each company. (If a company is not included in J.D. Power’s study, we skip this rating factor and average the remaining factor scores.)

    Fees

    Fees can add up very fast –– that’s why we give a higher score to companies who have fewer fees.

    Taylor Leamey

    Personal Finance Reporter

    Taylor Leamey is a personal finance reporter at The Simple Dollar who covers banking, savings, mortgages, loans and credit cards. Her writing has also been featured at Reviews.com, Interest.com and ISP.com.

    Reviewed by

    • Andrea Perez
      Andrea Perez
      Personal Finance Editor

      Andrea Perez is an editor at The Simple Dollar specializing in personal finance. Prior to that she specialized in digital marketing content for online learning websites. She holds a master’s degree in journalism and media studies from the University of South Florida.