Can You Get a Car Loan with Bad Credit?

Can You Get a Car Loan with Bad Credit?

It can be difficult to get approved for a car loan from a traditional lender if your credit score is poor. Lenders are also tightening their lending standards. This makes getting an auto loan more difficult for customers with poor credit.

But you don't have to accept an expensive loan from a dealer that offers a "buy here, pay here" option. You can locate the ideal bad-credit auto loans for your circumstances by doing some research.

How to Obtain a Car Loan with Bad Credit

You're not forced into terrible transactions just because you have a lower credit score. You can obtain an affordable auto loan by following the right procedures and completing your assigned homework.

Be Aware of Your Credit Rating

Check your credit score before shopping around for financing. Any score below 580 is regarded as poor under the credit rating system, which has a range of 300 to 850.

Your credit history, payment history, and amount of debt are some of the criteria that go into calculating your score. It can be decreased by the following:

  • Not paying your bills on schedule.
  • Using a sizable amount of your monthly credit limit.
  • Being new to the credit scene.

Put Money Aside for a Down Payment

Know the monthly payment you can afford and the expected annual percentage rate for your credit score before applying for a loan. Experts advise deducting little more than 10% to 15% of your take-home income each month.

Your monthly payment will be lowered if you save for a down payment. Additionally, putting down a larger payment on a car can improve your chances of getting an auto loan approved if your credit score is lower.


To avoid being caught off guard when it comes time to negotiate, try to prepare as much as you can. You'll probably be offered some of the highest advertised rates if your credit score is low. 

Experian data indicates that borrowers with a score of between 501 and 600, or those in the subprime group, could anticipate paying an average of 12.85 percent for new automobiles and 18.97 percent for used cars.

Look Around

Don't settle on a single lender once you start looking. Comparing rates from several lenders will help you get the best deal.

Banks and credit unions: This is where you begin if you already have a relationship with one of these institutions. Members of certain credit unions and banks are eligible for exclusive rates. You may have a better chance of getting your loan approved if you have a solid banking background.

Online lenders: To help you determine what terms you might be eligible for, a lot of internet lenders offer prequalification. When you apply, certain lenders might additionally take into account other information, such as your educational background or work experience.

Car dealerships: If you are unable to obtain financing from another lender, you may finance through a dealership. Car dealerships, however, frequently raise the prices they provide to increase profits. Although qualifying can be simpler, your rates probably won't be as attractive.

Purchase here, pay here dealerships Purchase here, pay here If a bank or lender denies your loan application, dealerships may be helpful, but proceed with caution. Even though these dealerships might be more willing to accept a customer with poor credit, the interest rates might be significantly higher.

Visit the Lender with a Friend

Assist a friend or family member to accompany you to the lender's office, advises the consumer lawyer. Having a trusted partner present during negotiations can boost self-assurance. Knowledge and confidence together might result in better loan terms.

Be Mindful of Add-Ons

Lending contracts containing unnecessary products and services are more common among subprime customers.

Never accept a loan that is dependent on the purchase of any extras, like car insurance, after-market services, or extended warranties. Particularly if you apply at a buy-here, pay-here dealership, be mindful of these add-ons.

Recognize that if you include these expenses in your loan, you run the risk of borrowing more than the car is worth and ending up in default on your loan.

Make Sure the Conditions Are Set in Stone

Before signing anything if you finance through a dealer, make sure the terms are final. To allow you to drive off the lot, a dealer can issue you provisional permission, but proceed with caution. You could have to make larger monthly payments than you originally agreed to because the terms of your loan aren't etched in stone.

Some dishonest car buyers would lure in customers with low stated prices, only to hike them up once the customer signs a contract. We refer to this dishonest technique as financing. Furthermore, even though it can resemble conditional approval, the practice is prohibited.


Obtaining a car loan may be more difficult if you have terrible credit. Additionally, you might have to deal with unfavorable terms or even exploitative loan tactics.

The good news is that you might be able to obtain the finest vehicle loan deal if you do your homework, get preapproved, and save money for a down payment.

Make prompt payments on any auto loan you decide is the best fit for you to improve your credit score. When your credit score rises, you might want to think about refinancing with a better loan.

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