Bad Credit Auto Loans for September 2024

Many car buyers today use an auto loan to help them pay for their new or used car purchase (in 2023, 79.7% borrowed when buying new, but only 38.4% did when buying used). You may also look to refinance your loan to get better terms or a longer payment period.

Qualifying for an auto loan depends on factors such as your income and credit history. If you have bad credit, you may find it difficult to qualify for the loan you need with the terms you want. That doesn’t mean you won’t be able to find a loan at all.

Here are some lenders to consider, including a look at the rates and repayment terms they offer to bad-credit borrowers.

Best bad credit auto loan companies compared

Best rates right now

Our recommendations for best auto loan companies for bad credit

Auto Credit Express

As long as you are employed full time (or have a fixed income), earn at least $1,500 per month, and can show proof of residency, you can likely get approved for an auto loan through Auto Credit Express. Even borrowers with bankruptcies can get approved, and you’re able to submit a loan request online in just a few minutes. Approval isn’t immediate, though, and you won’t see your rates or loan terms right away. There’s also very limited information regarding auto loans on its website.

Carvana

Carvana is an online car-buying service that delivers your vehicle to you or offers the option of picking up your car from an automated vending machine. In-house financing is available to borrowers, even those with bad credit, with repayment terms up to 72 months.

In order to qualify, borrowers only need to earn $4,000 or more per year, be 18 or older, and have no active bankruptcies. Buyers can get preapproved online in just a few minutes without affecting their credit score, but this financing is only available when buying one of Carvana’s vehicles. Also, refinancing through Carvana is not an option.

CarMax

Known for its nationwide used-car dealerships, CarMax may be an option if you’re interested in buying a vehicle and financing at the same time. Interest rates can be pretty high if you have a challenged credit score, and repayment terms through CarMax Auto Finance stop at just 72 months. That said, most buyers can get approved online in as little as five minutes, even with poor or bad credit.

Consumers Credit Union

If you’re struggling to get approved for an auto loan, Consumers Credit Union offers guaranteed loan approval to member borrowers who complete its eight-month secured loan Credit Smart program. Auto loans are only available for new or used cars seven years old or newer, but competitive rates and terms as long as 96 months are offered.

MyAutoLoan

Borrowers with credit scores as low as 600 may be able to find an auto loan for a new or used vehicle, or even refinance an existing vehicle, through MyAutoLoan. This platform gives you up to four loan offers through partner lenders with a range of eligibility criteria and terms. There’s no maximum loan amount, but purchase loans start at $8,000 (or $5,000 if you’re refinancing).

Borrowers in most states can get prequalified online without any credit impact. However, loans aren’t available in Alaska or Hawaii.

AutoPay

AutoPay is another lender platform that connects borrowers with new car, used car, and refinance loans from $2,500 all the way up to $100,000. Loan terms range from 24 to 96 months with competitive interest rates.

The actual loan terms and eligibility criteria may vary from one lender to the next, and some lenders may charge origination fees on their loans. Additionally, funding times can vary by lender and it may take multiple days (or longer) to get your loan funded.

Drivetime

If you have bad credit and are looking to buy a car, Drivetime offers an alternative to the Buy Here, Pay Here model. Through Drivetime’s network of dealerships and online platform, you can shop for a vehicle in their inventory and then finance your purchase all at once. Borrowers are able to get approved online with no impact to their credit, and even borrowers with prior bankruptcies or those with no credit history can be approved.

Depending on your state, you may be subject to various dealer expenses such as documentation, titling, and transportation fees. However, Drivetime does not charge origination fees on auto loans. While you can adjust your down payment amount and estimated monthly payment online, the repayment term is set at 70 months (Drivetime’s average). You may be able to adjust these terms, and therefore your monthly payment amount, at the dealership when it’s time to buy the vehicle.

Perhaps the biggest downside to Drivetime is that you are only able to finance the purchase of one of their vehicles; you can’t take a Drivetime loan elsewhere and fund another new or used car purchase. Drivetime also operates on a no-haggle pricing model, so the sticker price on the vehicle is what you’ll pay in the end.

Methodology

In order to determine the best bad credit auto loans and lenders, we looked at a number of key factors. These included the loan amounts accepted by each lender, whether new or used vehicles can be financed, and the loan terms offered. We also looked at borrower criteria, such as the minimum income and credit score required to qualify for an auto loan. Last, we considered the interest rates available at the time of the review and where each lender is available.

How to select the best auto loan for bad-credit lender

Choosing the best auto loan from a bad-credit lender isn’t that much different from picking any other auto loan. You’ll still want to spend some time finding the right lender for you, so you can not only buy your car successfully but also spend less in the end.

Shop around for the best rates

If possible, shop around with multiple lenders to see what kind of rates you’re given first, before accepting any loan offer. Many lenders will preapprove you online (sometimes without any impact to your credit score), enabling you to rate-shop before moving forward.

Even if you are preapproved for your loan before walking into the dealership, you may want to see what sort of loan offers the dealer can provide. To earn your business, the dealer’s partner lenders can sometimes beat whatever loan offers you already have, saving you even more in interest.

Choose the loan terms that work for your budget

More important, you’ll need to shop around until you find an auto loan that offers terms you can live with and afford. You’ll be paying off your vehicle for two to eight years, depending on the lender and loan terms you receive, so it’s important that you’re able to make those monthly payments without fail. Pick the lender that not only saves you money in interest but also offers an affordable repayment term.

Types of lenders that offer car loans for bad credit

While there are a number of self-proclaimed bad-credit lenders available, many mainstream lenders also offer loans to borrowers with bad credit as well as good credit. Deciding which is right for you depends on your credit score, financial situation, and even the vehicle you want to buy.

The lenders that offer car loans for bad credit include:

• Banks.
• Credit unions.
• Lending institutions.
• Online car sales companies.
• Dealerships.

Larger dealerships will sometimes offer their own financing. More often, they will find you rates and loan terms from partner lenders. Other dealerships may offer in-house financing, sometimes called “buy here, pay here (BHPH).” These loans are funded by the dealership itself, which means they can be offered to borrowers with bad credit or even no credit.

What you should know when applying for a bad-credit auto loan

Having bad credit doesn’t mean that you aren’t able to get an auto loan to buy a vehicle. On the contrary, there are many lenders willing to offer vehicle financing to bad-credit borrowers.

However, there are a few things you should know about bad credit auto loans.

• You may not be able to buy the vehicle you want. Not every lender provides loans to bad-credit borrowers, so you’ll have to find one willing to approve you. In some cases this will mean buying from a small dealership or specific online seller, which can limit the vehicles available to you for purchase.
• Your repayment options will be limited. When taking out an auto loan as a bad-credit borrower, you may only be offered certain repayment terms by the lender. Unlike shopping around for lenders who may offer terms as long as 96 months, you could be required to pay off your vehicle in just a few years.
• You’ll almost always pay more. As you might expect, taking out a bad-credit auto loan will almost always mean that your vehicle loan will cost you more in the end. You will likely be charged a higher interest rate on the loan, due to your credit rating and whatever terms the lender offers. You may also be subject to certain fees and expenses that other lenders don’t charge, which can increase your overall cost.

How to increase your chances for getting approved for a bad-credit car loan

If you have bad credit, you’re probably concerned about being approved for an auto loan in the first place. Here are some ways you can boost your chances of approval while also snagging the best deal in the process.

Buy used

In general you’ll find that you’re more likely to get approved for a loan if you buy a used vehicle instead of a new one. Sometimes buying a car that’s just two or three years old can improve your chances of approval, especially as used vehicles typically have a lower price tag than new cars.

That said, it’s also important to note that loans for new cars are usually given lower interest rates, so buying used may mean that you are offered a higher annual percentage rate (APR). If it is a deal-breaker for approval, you may not have a choice.

Find a good car deal

Most auto lenders will factor your loan approval and interest rate on the details of the vehicle you’re trying to buy. Equity will be one important factor, or how much the car is worth versus how much it costs. This is usually expressed as your loan-to-value (LTV) ratio.

If you buy a vehicle with a lot of equity (meaning that it’s worth more than you’re paying for it), the lender assumes less risk when offering you a loan. In this case you’re more likely to get approved and may even get a better interest rate. On the other hand, if you’re trying to buy a car with very little equity, no equity, or even negative equity (meaning that the car is worth less than you’re paying for it), you may have a tough time being approved for a loan or competitive repayment terms.

Add a cosigner

If your credit history makes it difficult to get approved for an auto loan, adding another creditworthy individual to the debt can tip the scales in your favor. By applying with a cosigner, you will reduce the lender’s risk and boost your chances of approval, sometimes even unlocking lower interest rates and more-desirable repayment terms.

Of course, the tradeoff here is that your cosigner must be willing to accept responsibility for the debt. If you make late payments or default on the loan, their credit will also be impacted, and they can be held responsible for any remaining balance. This makes it especially important to consider all factors and make sure that your cosigner understands their obligation and risk.

Shop around

Not every car lender will approve buyers with poor or bad credit. You may need to shop around a bit before you find a few willing to offer you a loan. Rate-shopping will let you assemble a list of potential lenders and compare the rates and terms offered.

This may also mean shopping around for the car you plan to buy or looking at the available vehicles through certain online car-buying sites. Many of these platforms can offer financing when you buy a vehicle through them. If a car-buying platform is one of the places you can get approved for a loan, you would potentially need to shop from the vehicles available there.

Talk to your bank

If you have an existing relationship with a particular bank, credit union, or financial institution that also offers loans, try applying for funding there. Even if your credit score is poor, your own bank may be willing to approve you if you have a history of positive account management.

Pay where you buy

To improve your chances of getting a bad-credit auto loan, shopping for a vehicle at a BHPH (buy here pay here) dealership is one way to do it. These lots are usually smaller than big-name brands and typically sell used vehicles only. They finance cars in-house, so you will pay where you shopped and make your monthly payments to the same business.

As these dealerships can choose which vehicles and borrowers to finance, you can often still get approved with fair credit, bad credit, or even no credit history.

TIME Stamp: Bad credit doesn’t preclude you from getting a car loan

Getting an auto loan is a necessary step in the car-buying process for many drivers. Qualifying for one depends heavily on factors such as your vehicle’s purchase price, your income, and of course, your credit. If you have bad credit, getting an auto loan is still possible, though your options may be a bit more limited. Finding a bad-credit auto lender is your best bet for getting you the funds you need to buy a car at a monthly price you can afford.

Frequently asked questions (FAQs)

What is a bad-credit car loan?

A bad-credit car loan is funding used by a borrower with fair, poor, or bad credit to purchase a new or used vehicle. These loans may have unusual eligibility requirements, as borrowers may have a limited or negative credit history. They typically have higher interest rates and more-limited repayment terms compared to typical auto loans.

How do you buy a car with bad credit and no cosigner?

If you don’t have a creditworthy cosigner to add to your auto loan, you can still buy a car with bad credit by finding a bad-credit lender. These lenders specialize in borrowers with lower scores and may offer credit-building programs, higher-interest loans, and more-limited repayment terms in order to qualify. Borrowers with bad credit can also consider buying through a BHPH dealership, where credit checks and even down payment requirements can be waived.

What’s the lowest credit score you can have to finance a car?

There is no minimum credit score required to finance, or refinance, a car. Your credit score requirement will vary from one lender to the next, as will the details of your vehicle purchase. Still, there are many lenders willing to offer loans to borrowers with fair credit, poor credit, bad credit, or even no credit.

Is it better to get an auto loan from your bank or the dealership?

In many cases it’s better to get preapproved for an auto loan from your bank, then check the offers available through the dealership. Your bank may be willing to take your existing relationship into consideration and offer you competitive loan terms, but the dealership can often match or even beat those terms through partner lenders in an effort to gain your business.