How to Get a Car Loan With Bad Credit

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Key takeaways

You can increase your approval odds by making a larger down payment or choosing a less expensive car.
Applying for an auto loan with a cosigner can lead to lower interest rates, smaller payments, and easier approval.
Prequalifying and comparing offers can help you find the best terms without affecting your credit.

A bad credit score will not prevent you from getting a car loan.

You can finance a car with bad credit or no credit history at all, but it will cost you more. Lenders charge bad credit borrowers extra to compensate for the risk. Expect higher annual percentage rates (APRs) and larger down payments. While a loan will be more expensive than if you have good credit, there are ways to make borrowing affordable.

Here’s what you need to know about getting a car loan with bad credit and what to watch out for.

Steps to get bad credit auto loans with guaranteed approval

Getting a car loan with bad credit is more challenging. Before you head to the dealership, take a few steps to improve your approval odds. You may even be able to find low-interest car loans for bad credit and reduce the amount you’ll pay overall.

The one thing you won’t find is guaranteed approval auto loans for bad credit. While some lenders may advertise guaranteed approval, there is no such thing. All lenders consider your credit score, debt-to-income ratio (DTI), and employment. No lenders approve everyone.

Here’s how to improve your chances of securing an auto loan with a poor score.

Check your credit score

Take a moment to learn your credit score. Lenders have different requirements. Knowing where you stand helps you target the right lenders.

While you’re at it, check your credit report. You can get it for free once a year from annualcreditreport.com. Dispute any errors and pay down outstanding debts where possible to boost your score. Even a slight increase can improve your loan terms.

Click here to learn more about your credit score!

Make a larger down payment

The more money you can pay upfront, the less you have to borrow. Borrowing a smaller amount is less risky for the lender. They are more likely to approve you, even with bad credit.

Consider saving up, using funds from a tax refund or bonus, or trying to get same-day loans. If you take out a personal loan to finance a car, make sure you can afford to repay it.

Find a cosigner

Applying for a car loan with a cosigner can significantly improve your approval odds. You may even secure better terms.

This is because your cosigner is responsible for repaying the loan should you default. Their presence reassures the lender that they will get their money back.

When deciding whether to use a cosigner, consider if you want complete control later. If so, ask your lender can a cosigner be removed from a car loan before you borrow. Different lenders have different policies.

Take out a short-term loan

Some lenders offer short-term auto loans that last 24–36 months. A shorter loan term carries less risk for the lender. In return, they offer lower interest rates, though the difference may not be too much for bad credit borrowers.

With a short-term loan, the monthly payments will be higher, but you’ll pay off the vehicle faster. You will also save money in the long run and avoid being upside down on your loan.

Reduce how much you need to borrow

Choose a less expensive vehicle or even a used car to minimize the loan amount. The less you have to borrow, the lower the risk you pose to lenders and the more attractive your application is. You will have a better chance of getting approved. You can also pay off the loan faster, even with higher interest rates.

Considering taking out a loan?

Discover how many you can have at once!

Auto lenders for bad credit

When searching for car loans for people with bad credit, knowing where to apply can make a significant difference. Not all lenders consider applicants with low scores.

Here are the most common auto loan options for bad credit.

Dealer financing: Securing financing through the dealership is convenient. Dealerships typically contact multiple lenders for you and may offer in-house financing. The catch is that lenders may mark up the interest rate, making the loan more expensive.

One trick is prequalifying for a few offers before going to the dealership. The dealer may be able to match or beat your offer and get you approved directly at the lot.

Banks or credit unions: Banks and credit unions may approve your loan if you have a good relationship with them. Since you are already a customer, they may be more willing to lend to you. Credit unions are an especially good choice as they often have lenient loan requirements.

Online lenders: Online lenders often cater to borrowers with low scores. Many even provide fast approval. Read customer reviews first to make sure the lender is legitimate.

Buy here, pay here financing: Buy here, pay here financing is offered directly by dealerships. No third-party lenders are involved. While convenient, interest rates and car prices can be extremely high. Some dealerships install a GPS or starter-interrupt device that can shut down your car if you miss a payment.

Not all dealerships report your payments to the credit bureaus, so these loans may not help improve your score. Still, they can be a last-resort option if others fall through.

What to know before applying for bad credit car loans

Lenders look at several factors to decide if they will approve you. These include your income, job history, debt-to-income ratio, and, of course, your credit score.

Why is your credit score important? Because it influences everything from your down payment requirement to the loan approval itself. Simply put, it directly impacts the interest rates, fees, and terms you’ll receive from lenders.

Consider credit score factors

Your credit score reflects how well you manage borrowing and repaying money. A higher score tells lenders that you are likely to repay, while a lower score says you are a high-risk borrower.

The majority of lenders use FICO credit scores. These scores are calculated using the following five factors:

Payment history (35%): Paying your bills on time every month is the best thing you can do to improve your score.

Credit utilization (30%): Spend no more than 30% of your credit limit. Low usage shows you do not rely too much on borrowing. It also indicates you can afford to pay your bills.

Length of credit history (15%): Lenders like borrowers with a long credit history. It gives them more information to consider. All you can do here is wait.

Credit mix (10%): Your mix refers to the types of accounts you have – cards and loans. Lenders prefer you to have both, but it’s a minor factor. Do not take on debt you cannot afford.

New inquiries (10%): When you apply for a new credit account, the lender will do a hard inquiry. This will lower your score by a few points for a short time.

Monitor your credit

Before you buy a car, work on your credit score. You can improve your score fast by paying down outstanding balances, reporting past rent and utility payments, or becoming an authorized user on someone else’s card.

Then, keep track of your score. If you see it drop, figure out what happened.

Building credit takes time, but you’ll save money in the long run.

Want to boost your score?

Find out how to fix bad credit!

How to get a car with bad credit and no cosigner

Securing a car loan without a cosigner is entirely possible. Start by choosing a less expensive vehicle. Then save for a larger down payment. The less you have to borrow, the lower risk you pose to a lender.

Pay down your debt to have a lower debt-to-income ratio (DTI). A DTI under 35% indicates that you can afford the loan.

Next, look for lenders that specialize in subprime financing. Prequalify with multiple lenders and compare offers to get the best deal. Look at the interest rate, fees, repayment term, and monthly payments. Apply for the cheapest loan you can afford.

Leasing is another option. Learning how to lease a car with bad credit and no cosigner can help you get a vehicle without taking out a loan. Leasing companies typically require a good score. You may be approved with a larger upfront payment or proof of steady income.

Refinance car loans for bad credit

If you’re stuck with a high-interest auto loan, refinancing could be a smart move. Refinancing can lower your monthly payments, reduce your interest rate, or extend your loan term.

Start by checking your score to see if it’s improved since you got your original loan. Even a slight improvement can help you qualify for better terms. Some lenders specialize in refinancing for people with poor scores, so shop around and compare offers.

Keep in mind that refinancing may come with fees. Extending your loan term could mean paying more interest over time. Still, refinancing is worth considering if you need room in your monthly budget or want to switch lenders.

Frequently asked questions

1. What is bad credit for car loans?

Many auto lenders consider scores below 600 as bad credit. You may still qualify for a loan, but the terms will be less favorable.

2. Can I get a car loan with a 500 credit score?

Getting a car loan with a 500 credit score is possible, though your options will be limited. You’ll likely face higher interest rates and may need a larger down payment or a cosigner to qualify. Some lenders and dealerships offer financing specifically for borrowers with low scores. Shop around to find the best deal available.

3. How much does a cosigner help on auto loans?

A cosigner with good credit can significantly increase your chances of approval. They are responsible for paying if you default, and so lower the risk for the lender. You are more likely to qualify for a loan with better terms, a lower interest rate, and a larger amount.

4. Which FICO® score is used for auto loans?

Most auto lenders use the FICO® Auto Score. The score ranges from 250 to 900 and weighs your auto loan and installment debt history more heavily than general scores. It helps lenders better predict how likely you are to repay a car loan based on your past behavior with similar loans.

Bottom line

Getting a car loan with bad credit may be challenging, but it’s possible. Find a cosigner with good credit. Save up for a larger down payment. Or select a less expensive vehicle.

Take the time to prequalify with multiple lenders. Prequalifying lets you view loan options without impacting your score. Compare interest rates, terms, amounts, and fees carefully. Then, apply for the best financing option.

If you’re not in a rush, it can pay to wait and improve your score. Pay down current debts. Correct errors on your credit report. Pay your bills on time. Little by little, your score will increase, and you can access better loans.

With a bit of preparation and patience, you can secure an auto loan even with less-than-perfect credit.

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8. Faster access to funds is based on comparison of traditional banking policies and deposit of paper checks from employers and government agencies versus deposits made electronically. Direct deposit and earlier availability of funds is subject to timing of payer’s submission of deposits.

9. Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group. Funds held in Savings Pods are FDIC-insured on a pass-through basis up to $250,000 at our partner bank Choice Financial Group, member FDIC.

10. Paycheck Advance is For eligible customers only. Your actual available Paycheck Advance amount will be displayed to you in the mobile app and may change from time to time. Conditions and eligibility may vary and are subject to change at any time, at the sole discretion of Finco Advance LLC, which offers this optional feature. Finco Advance LLC is a financial technology company, not a bank.

11. Expedited disbursement of your Paycheck Advance is an optional feature that is subject to an Instant Access Fee and may not be available to all users. Expedited disbursements may take up to an hour. For more information, please refer to Paycheck Advance Terms and Conditions.

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20. Baggage Insurance Plan coverage can be in effect for Covered Persons for eligible lost, damaged, or stolen Baggage during their travel on a Common Carrier Vehicle (e.g. plane, train, ship, or bus) when the Entire Fare for a ticket for the trip (one- way or round-trip) is charged to an Eligible Card. Coverage can be provided for up to $2,000 for checked Baggage and up to a combined maximum of $3,000 for checked and carry-on baggage, in excess of coverage provided by the Common Carrier. The coverage is also subject to a $3,000 aggregate limit per Covered Trip. For New York State residents, there is a $2,000 per bag/suitcase limit for each Covered Person with a $10,000 aggregate maximum for all Covered Persons per Covered Trip. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

21. Car Rental Loss and Damage Insurance can provide coverage up to $75,000 for theft of or damage to most rental vehicles when you use your eligible Card to reserve and pay for the entire eligible vehicle rental and decline the collision damage waiver or similar option offered by the Commercial Car Rental Company. This product provides secondary coverage and does not include liability coverage. Not all vehicle types or rentals are covered. Geographic restrictions apply. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company. Car Rental Loss or Damage Coverage is offered through American Express Travel Related Services Company, Inc.

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23. When an American Express® Card Member charges a Covered Purchase to an Eligible Card, Extended Warranty§ can provide up to one extra year added to the Original Manufacturer’s Warranty. Applies to warranties of five (5) years or less. Coverage is up to the actual amount charged to your Card for the item up to a maximum of $10,000; not to exceed $50,000 per Card Member account per calendar year. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

24. Purchase Protection is an embedded benefit of your Card Membership and requires no enrollment. It can help protect Covered Purchases made on your Eligible Card when they’re accidentally damaged, stolen, or lost, for up to 90 days from the Covered Purchase date. The coverage is limited to up to $10,000 per occurrence, up to $50,000 per Card Member account per calendar year. Coverage Limits Apply. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

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26. The secured Chime Credit Builder Visa® Card is issued by Stride Bank, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.

27. Banking services and debit card provided by The Bancorp Bank N.A. or Stride Bank, N.A., Members FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted.

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30. To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Chime Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.

31. Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.

32. Based on a representative study conducted by Experian®, members who made their first purchase with Credit Builder between June 2020 and October 2020 observed an average FICO® Score 8 increase of 30 points after approximately 8 months. On-time payment history can have a positive impact on your credit score. Late payment may negatively impact your credit score.

33. On-time payment history may have a positive impact on your credit score. Late payment may negatively impact your credit score. Chime will report your activities to Transunion®, Experian®, and Equifax®. Impact on your credit may vary, as Credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.

34. Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.

35. SpotMe® on Debit is an optional, no fee overdraft service attached to your Chime Checking Account. To qualify for the SpotMe on Debit service, you must receive $200 or more in qualifying direct deposits to your Chime Checking Account each month and have activated your Visa debit card. Qualifying members will be allowed to overdraw their Chime Checking Account for up to $20 on debit card purchases and cash withdrawals initially but may later be eligible for a higher limit of up to $200 or more based on Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. The SpotMe on Debit limit will be displayed within the Chime mobile app and is subject to change at any time, at Chime’s sole discretion. Although Chime does not charge any overdraft fees for SpotMe on Debit, there may be out-of-network or third-party fees associated with ATM transactions. SpotMe on Debit will not cover any non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. SpotMe on Debit Terms and Conditions.

36. Tipping or not tipping has no impact on your eligibility for SpotMe®.

37. Out-of-network ATM withdrawal fees may apply except at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM.

38. Save When I Get Paid automatically transfers 10% of your direct deposits of $500 or more from your Checking Account into your savings account.

39. Round Ups automatically round up debit card purchases to the nearest dollar and transfer the round up from your Chime Checking Account to your savings account.

40. Mobile Check Deposit eligibility is determined by Chime in its sole discretion and may be granted based on various factors including, but not limited to, a member’s direct deposit enrollment status.

41. Funds are automatically debited from your Checking Account and typically deposited into the recipient’s Checking Account within seconds. Pay Anyone transactions will be monitored and may be held, delayed or blocked if the transfer could result in fraud or another form of financial harm. Sometimes instant transfers can be delayed.

42. Pay Anyone transactions will be monitored and may be held, delayed or blocked if the transfer could result in fraud or another form of financial harm. Sometimes instant transfers can be delayed. Non-Chime members must use a valid debit card to claim funds.

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Rachel Alulis

Rachel Alulis has been the lead editor for Moneyfor’s credit cards team since 2015 and for the financial rewards team since 2023. Before joining Moneyfor, Rachel worked at USA Today and the Des Moines Register. She then established a successful freelance writing and editing business specializing in personal finance. Rachel holds a bachelor’s degree in journalism and an MBA.

How to Get Approved for Car Loans with Bad Credit

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