A poor credit score doesn’t eliminate your need for a vehicle to get to work or the grocery store. Thankfully, it doesn’t totally erase your options to finance one, either. If a tough financial situation has left you with less than stellar credit but you still need an auto loan, take heart: There are good financing options for auto loans, even if you have bad credit. We’ll cover our top picks for the best bad credit car loans below.
But first, keep in mind that there are plenty of steps you can take to boost your credit score while you shop for a loan. If you can improve your score, you’ll have a much better chance of getting approved and snagging a better interest rate. You can even raise your credit score in as little as month’s time.
As you work to improve your score, check out our list of the best lenders offering car loans for bad credit borrowers:
The Simple Dollar’s Picks for Best Bad Credit Auto Loans
- Best for Special Financing: Auto Credit Express
- Best Lead Generator: MyAutoLoan.com
- Best of the Big Banks: Capital One
Poor credit history isn’t always reflective of your character or work ethic, but it does affect the way a bank or lender sees you. If you have a poor credit rating, it’s nearly impossible to secure a traditional auto loan on your own. That’s why we did the work to find the top options for people who can’t secure a traditional auto loan.
Ideally, you should avoid large purchases that require entering into any kind of loan agreement while working toward fixing your bad credit rating. Your focus should be entirely on paying down any outstanding balances and effectively managing existing credit accounts. However, for many people across the country, public transit isn’t an option, and a personal automobile is their only means of transportation between home and work.
Other professions require personal transportation as a part of the job description. For these workers, a car payment can be the difference between making money to pay bills or having no salary at all. In those cases, a bad-credit car loan becomes absolutely necessary, even if the terms of the loan aren’t particularly favorable.
For anyone currently facing that situation, we’ve created this guide to help you understand bad-credit car loans, find the best one for you, and also provide tips on how to manage them as you drive down that long road to credit recovery.
Keep reading to find out why these companies came out on top of our list of bad credit auto loans. We also outline several strategies that will help you keep your costs down and avoid scams once it’s time to make a deal for your new wheels.
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Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.
Best for Special Financing: Auto Credit Express
If you have bad credit, Auto Credit Express offers a range of knowledge and options that may ultimately translate into a lower APR. Unlike many lenders, the company won’t automatically deny a loan for an older, high-mileage vehicle. You can get help here even if you’ve been through bankruptcy, because the company works with traditional dealers as well as special-finance dealers who take on buyers with the lowest credit scores. In most cases, you’ll need monthly gross income of at least $1,500 to $1,800.
Reasons to Sign up
Reasons to Sign up
Reasons to Avoid
Reasons to Avoid
- Great if you want to keep your options open.
- Ideal if you’re looking for funding to purchase an older car.
- One of the most reputable, consumer-friendly lenders for bad credit.
- Accredited with Better Business Bureau and has an A+ rating.
- Won’t approve loans for purchase of a car from a private seller.
Best Lead Generator: MyAutoLoan.com
MyAutoLoan.com puts you in touch with up to four lenders in minutes, even if you have bad credit.
One of the site’s most impressive tools is an interest-rate estimator that helps give you an idea of what kind of APR you might get.
The site is clear about terms: You must have at least $1,800 a month or $21,600 per year in income and no open bankruptcies. They also restrict loans to cars that are 10 years old or newer with fewer than 125,000 miles, potentially shutting out some borrowers. It’s up to potential lenders whether a co-signer or down payment will be required. MyAutoLoan has an A+ rating with the Better Business Bureau and many strong customer reviews.
Reasons to Sign up
Reasons to Sign up
Reasons to Avoid
Reasons to Avoid
- Saves time on shopping by putting you in touch with multiple lenders.
- Might be a good choice if you are considering a private seller.
- If you don’t want your information shared with multiple lenders.
- May not fund the purchase of an older or higher-mileage vehicle.
Best of the Big Banks: Capital One
Capital One is one of the primary big-bank lenders for bad-credit car buyers, with more than 12,000 dealers accepting its financing. They also offer competitive interest rates and extensive buyer-education resources. The Auto Navigator tool allows you to get pre-approved and compare car payments on specific vehicles without leaving your house.
Used-car restrictions are relatively liberal: They can be no older than 10 years old and must have fewer than 120,000 miles to be eligible for financing.
Reasons to Sign up
Reasons to Sign up
Reasons to Avoid
Reasons to Avoid
- A secure option for those who don’t want an unknown lender.
- Borrowers in many regions — particularly the Mid-Atlantic, South, and Northeast — can visit a branch to do business face-to-face.
- Will not fund a loan for a private-seller purchase or a lease buyout.
- Won’t be able to fund loan under $4,000 or more than $40,000.
Other Lenders to Consider for Bad Credit Car Loans
- One of the largest lenders for bad credit, but they are getting pickier.
- Approves loans for new cards, used cars, lease buyouts, and private sellers.
- Online account management or visit one of over 6,000 branches.
Along with Capital One, Wells Fargo is one of the largest lenders of car loans for bad credit, though it may be getting pickier — recently, Wells Fargo has begun to scale back its auto lending business.
Wells Fargo approves loans for new cars, used cars, and (unlike Capital One) lease buyouts and private-seller purchases. You can manage your account online or head to one of 6,200 branches nationwide if you prefer to do business in person.
- Site supports customers applying for all major loan types except lease buyouts.
- Extremely informative on the lending process with customer-friendly tools and tips.
- Chat service available for those who want real-time information.
RoadLoans is owned by Santander Consumer USA, one of the nation’s leading providers of bad credit auto loans. The site accommodates customers who are applying for all major loan types except lease buyouts.
RoadLoans is a standout when it comes to comprehensive FAQs about the lending process and customer-friendly tools and tips that help take the mystery out of car buying. A chat service is a nice bonus for those who have questions before applying. However, potential customers should be aware that it’s the subject of many poor reviews that complain of restrictive loans and too many credit checks.
Blue Sky Auto Finance
- Even customers who have declared bankruptcy might still be eligible.
- Site is very transparent about loan requirements.
- Accredited by the Better Business Bureau with an A+ rating.
Blue Sky Auto Finance connects bad-credit borrowers with multiple lenders. Customers who’ve declared bankruptcy are still welcome to apply, though the bankruptcy must be discharged.
The site is clearer about requirements than many of its competitors: You’ll need at least a 550 credit score and an income of at least $1,800 a month to receive a loan that isn’t restricted to a certain dealer, but may be eligible for dealer-specific loans if your score is lower. The site includes some good car-buying tips and finance calculators, but it is a bit cluttered and disorganized. Blue Sky is a relatively new company, established in 2004, but it has lodged few complaints and has an A+ with the BBB.
CarsDirect is best known as a car-buying service, but it also provides a portal for getting the best auto loan. It provided a wider range of customer-friendly information than its competitors, including a loan calculator, trade-in-value calculator, and dozens of articles about car loans and buying strategies.
There’s also no minimum or maximum amount for which you can apply.
- Great for smaller-dollar car loans on an older or used car.
- Not the fastest site experience.
- Will work with you even if you have no credit or have a past bankruptcy.
is a well-designed, easy to use service that connects customers with over 150 lenders who all compete to offer the best auto loan. They care about using cutting-edge technology to make the borrowing process as easy for consumers as possible.
- Get access to a huge network of potential lenders.
- Over 9,000 certified reviews from customers.
- They will have to do a hard credit pull.
OneMain Financial is a stable, trusted lender that has served over 10 million customers. They’re known for quick service online and courteous service at their many in-person branches.
- Great one-on-one customer support.
- Lowest rates are not quite as competitive as other lenders we reviewed.
- A+ rating with the Better Business Bureau.
ClearLane is another marketplace that matches you up with lenders, and they try to separate themselves based on the way they quickly provide useful information. After filling out anonymous forms (that don’t require a hard credit pull), you’re presented with an estimate of what you qualify for and what you’ll pay. It’s easy to use and straightforward.
- Pre-qualify without a hard credit pull.
- Income requirement of $1,800/month.
- Can take longer to get funded compared with competitors.
Carvana really focuses on streamlining the process of pre-qualification. That way you can search for a loan without having to worry about each dealership running your credit score.
- They don’t have any credit score requirements.
- They have a very informative website that walks you through the pre-qualification process.
- You can also search for and buy cars directly on their site.
Understanding How Bad Credit Affects Your Car Loan
Even if it doesn’t get you flat-out rejected for financing, a poor credit score is always going to translate to a larger monthly payment on any approved loan. Borrowers with lower credit scores are more likely to default on their loans, leaving the lender on the hook for the remaining balance — so lenders charge higher interest rates to offset that risk.
The following table will give you a better understanding of how a lower credit score translates to higher interest rates (annual percentage rate) and higher monthly car payments:
|FICO Score||APR||Monthly Payment||Total Interest Paid|
*based on a 60-month, $20,000 auto loan at current national average rates
As you can see, your credit rating can drastically alter the APR on any approved auto loan, either increasing or decreasing your monthly cost and lifetime interest payment. (That’s one reason to consider refinancing your auto loan if your credit score improves after a year or two — you might nab a much better rate than you originally qualified for.)
To gain a better understanding of your credit score and how it can affect things like your auto loan’s APR, check out our in-depth Credit Score Guide. In it, you’ll find valuable information on how you can improve your score in order to earn those lower payment rates on future auto loans.
How to Shop for Car Loans When You Have Bad Credit
Buying a car is a chore few people relish. While everyone likes a set of shiny new wheels, bargaining with dealers makes even shoppers with top-notch credit uncomfortable. The promise of that new car smell can only be so motivating.
If you have bad credit, it’s even more important to be prepared. Here are some shopping tips specifically for buyers who need car loans for bad credit:
Steps to Take Before Going to a Dealership
Before you even step foot in a dealership, there are a number of steps you can take to prepare for your auto purchase and subsequent loan application to ensure the best financial decision and a smooth transaction.
Tip #1: Determine your exact vehicle needs.
Because you can expect to pay a much higher APR with a bad-credit auto loan, you don’t want to purchase an automobile that is either larger or includes more amenities than is absolutely necessary for your day-to-day travel. Both of these things tend to lead to higher costs. And conversely, if you have a large family, or if your job requires you to transport goods or supplies, you need to make sure that you don’t purchase a vehicle that is less than what you need.
Things like gas mileage, total daily commute, and expected routine maintenance should also factor into your planning. You know your personal transportation needs more than anyone else. Determining the exact nature of them before you head to the dealership will help ensure that you aren’t pressured into a purchase that would only worsen your financial situation.
Tip #2: Set a budget.
Calculate an estimate of those payments and figure out exactly how much you can afford to spend on a vehicle. Then check sites like Kelley Blue Book or Edmunds to get a better idea of the true cost and market value of your desired vehicle. (Dealer websites, car magazines, local newspapers, and Craigslist can help, too.) Sticker price is rarely the best deal, and doing your research will give you some room to negotiate.
It’s also a good idea to examine costs at different term lengths. You’ll notice that the longer the contract, the smaller the monthly payments. However, because of the continued interest payments, you’ll pay more in the long run.
Many bad-credit car loans are 24- to 36-month terms, as opposed to the more traditional 48 to 60 months. Again, this is to reduce the risk for the lender by collecting more upfront in the event of a potential default. Make sure to factor in the potential for a shorter loan term when making your budget.
Also remember that most states require car owners to carry auto insurance, as do many lenders, so that’s another cost you’ll need to factor into the monthly expenses associated with your vehicle. It’s a good idea to get an insurance price quote as a part of your budget planning.
Tip #3: Know what’s on your credit report.
You should make it a habit to consistently monitor your own credit report, as it’s helpful to know what’s in it — and to dispute any errors — long before you walk into a car dealership or apply for an auto loan.
Each of the three major credit bureaus are required by law to provide you with a free copy of your credit report once per year — go directly to the industry’s AnnualCreditReport.com website. As with anything else on the internet, beware of imitators with similar URLs: Never pay for your free credit report.
If you’ve already obtained your free copies for the year, you can purchase another one from any of the three major bureaus. To avoid any potential scams, it’s best to contact them directly. You can do so at:
If you find any erroneous information on one of your credit reports — and mistakes do happen — dispute the errors. If you’re able to get inaccurate negative information removed, your credit score will improve.
Tips for When It’s Time to Buy a Vehicle
After you’ve done all your planning and research, you’re ready to put it all to use. Here are some things to keep in mind as you make your purchase:
Tip #4: Don’t move out of your price range.
Any little bit extra tacked on to what you were planning to pay could end up costing a lot in the end. Your payments will grow exponentially if you accept a high interest rate. You went through the work of making your budget. Stick to it.
Tip #5: Don’t be afraid to negotiate.
It can seem like an intimidating proposition to some, but if you did the research, you already should know both what a car is worth and what you’re willing (and able) to pay. If the vehicle you need is out of your price range, do what you can to get it in your range. If it’s already in your range, try to get it lower if your research justifies it.
Any little bit now can save you a lot in the long run. Because of your bad credit score, you most likely won’t be able to negotiate the terms of your auto loan, but you can always try with the purchase price.
When you know your budget, you’ll also be better prepared to haggle. Simply be firm about what your max price is, and try to talk the dealer down to it. You have nothing to lose!
Tip #6: Be careful with add-on products and services.
Oftentimes, after you’ve already shaken hands and agreed to a purchase price and loan terms, you will be offered additional products and services before you sign a contract. Most likely, these were not included in the price quoted. If you agree to any of them, the cost will be added onto the previously-agreed cost of the car, wh