How do I improve my credit?

The process of improving your credit takes quite a bit of time. But the stronger your credit is, the better rates and terms you will receive. Some ways to work towards increasing your credit score include: Keeping track of your credit score. Making payments on time. Paying down debt. Taking advantage of self-reporting. Only applying for loans you can truly afford. Not applying for too many different kinds of accounts at once.

Will having a co-signer increase my likelihood of approval?

Applying for a loan with a co-signer who has excellent credit will greatly increase your likelihood of gaining loan approval. The role of a co-signer serves as an extra layer of protection for the lender. The lender gains security because the co-signer is on the hook for payments if the primary borrower can't make them. Because of this, having a co-signer can earn you a decent rate and term, even if you don't have the best credit.

What is the lowest score you can get a car loan with?

While this answer varies by specific lender, the better your score is, the better your rates and terms will be. If you have low or no credit, you may still qualify for a loan but should expect a steeper APR. In the fourth quarter of 2022, drivers with scores of 500 or lower received an average rate of 13.42 percent for new and 20.62 percent for used cars, according to Experian. Fortunately, many lenders are moving away from using credit scores as the sole measure of ability to pay off loans. Instead, lenders are considering factors such as work or education history.

What should I do if I get denied a car loan due to poor credit?

There are still ways to get behind the wheel following an initial denial. Firstly, it is important to take time to improve your credit. Do this by paying down any debt to lower your credit utilization rate. Otherwise, consider getting a co-signer for your auto loan.

What do lenders ask for in a loan application?

When applying for an auto loan, lenders will require proof of income and employment, personal details — date of birth, Social Security number, address and phone number — proof of insurance and vehicle information. It is important to fill out the application completely and correctly to ensure you avoid denial due to errors on the application.

How do you buy a car with bad credit and no co-signer?

When you have bad credit and no one to stand as your co-signer, it is best to look for lenders that use other factors to measure risk. Many online lenders use education and work history to determine rates and terms, for example.

Best bad credit auto loan rates for June 2023

Written by

Rebecca Betterton

Edited by

Rhys Subitch

Reviewed by

Mark Kantrowtiz

Jun 02, 2023

The Bankrate promise

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editoral integrity, this post may contain references to products from our partners. Here's an explanation for how we make money.

Bankrate’s best auto loans for borrowers with bad credit are selected based on interest rates, terms, transparency and — most importantly — flexible eligibility requirements. While a bad credit auto loan is technically no different from a normal loan, you can expect higher interest rates.

To gain approval for an auto loan, lenders will assess how much of a risk it is to lend to you based on your credit history and how much the vehicle is worth compared to the loan amount. That risk level goes into determining the interest rates and terms available to you. This means getting lender approval with poor credit history can be a challenge.

But it is possible. Generally, bad credit falls below 580. Many lenders — including some selected as top bad credit lenders by Bankrate — are moving past the archaic approach of purely credit-based lending judgements and factor in aspects such as payment history on previous auto loans, work history or education.

The process of taking out a bad credit loan is a similar process to that of any other loan. To get started, follow these steps:

1

Calculate how much car you can afford.

Budget out more than just the monthly cost — consider insurance, gas and maintenance costs as well.

2

Shop around.

Compare rates and terms from at least three different lenders before moving forward. Pay close attention to APR (annual percentage rate) — which tends to be higher for bad credit auto loans.

3

Apply for preapproval.

Applying for preapproval will give you a better idea of what to expect from loan terms and rates. It will also give you leverage for negotiating rates and the auto’s price.

4

Submit application.

To submit your application you will need to provide information about yourself — and potentially the vehicle you're considering. Prepare this documentation ahead of time.

5

Begin loan payments.

As soon as you receive your loan, your payment schedule will begin. Set automatic payments and keep track to avoid any fees.
Choosing the right loan and best lender for you is based on which loan fits your budget and financial needs. When shopping for an auto loan, compare APRs across multiple lenders to make sure you are getting a competitive rate. Look for lenders that keep fees to a minimum and offer repayment terms that fit your needs. It is a good idea to gain at least three quotes before signing off on a loan. Give special attention to the following factors:

1

Approval requirements

Every lender holds its own requirements in order to gain loan approval. This is especially true when it comes to bad credit loans. Pay careful attention to minimum credit requirements to be sure you aren’t applying for a loan outside your range.

2

Interest rates

The APR that lenders will offer is based on your specific financial history. It is important to remember that the lowest interest rate advertised is not what you will receive. When comparing potential rates be sure to calculate additional fees or possible penalties.

3

Loan amounts

Determining the right loan amount requires careful consideration regarding how much vehicle you can afford. Be honest about your budget and use an online calculator before applying.

4

Repayment options

Auto loan terms typically range from 24 to 84 months. The longer the lifetime of your loan is, the more interest you will pay. But a longer loan will also yield a lower monthly payment. Keep this in mind when deciding the length of your loan.

5

Customer service

Consider the benefits of a lender's customer service on aspects such as online availability, face-to-face communication and hours of operation.


4.2 Bankrate Score	APR from 8.49- 16.19% * with AutoPay	Term 24-84mo	Min credit score Not disclosed	Apply on partner site	Apply on partner site
4.2 Bankrate Score	APR from 2.99%	Term 24-96mo	Min credit score Not disclosed	Apply on partner site	Apply on partner site
4.1 Bankrate Score	APR from 5.69- 28.55%	Term 24-72mo	Min credit score Not disclosed	Apply on partner site	Apply on partner site
3.9 Bankrate Score	APR from 5.24%	Term 60mo	Min credit score 300	Apply on partner site	Apply on partner site
3.6 Bankrate Score	Network of dealer partners has closed $1 billion in bad credit auto loans Specializes in bad credit, no credit, bankruptcy and reposession In business since 1999 Easy, 30-second pre-qualification form Bad Credit applicants must have $2000/month income to qualify	Apply on partner site	Apply on partner site
4.0 Bankrate Score	APR from 5.49%	Term 24-84mo	Min credit score 600	Apply on partner site	Apply on partner site
3.6 Bankrate Score	Network of dealer partners has closed $1 billion in bad credit auto loans Specializes in bad credit, no credit, bankruptcy and reposession In business since 1999 Easy, 30-second pre-qualification form Bad credit applicants must have $2000/month income to qualify	Apply on partner site	Apply on partner site
4.0 Bankrate Score	APR from 4.49%	Term 24-84mo	Min credit score 560	Apply on partner site	Apply on partner site
4.2 Bankrate Score	APR from 2.99%	Term 24-96mo	Min credit score Not disclosed	Apply on partner site	Apply on partner site
4.2 Bankrate Score	APR from 2.99%	Term 24-96mo	Min credit score Not disclosed	Apply on partner site	Apply on partner site
	Get approved in 2 minutes or less for credit lines up to $200,000. Apply once, even if you aren't ready to purchase for up to 24 months Use Flexline™ to buy new or used vehicles, buyout leases or refinance loans. No impact to credit for pre-approval. One hard credit pull to access line of credit for life* *Lifetime access with rotating balance, lifetime access expires with 24 months of inactivity w/0.25% autopay discount	Apply on partner site	Apply on partner site

What are bad credit auto loans and how do they work?

Auto loans are secured loans that use the car you are buying as collateral. A bad credit auto loan is essentially the same as a normal auto loan but usually with higher interest rates and more expansive acceptance criteria.

You are typically asked to pay a fixed interest rate and make monthly payments for 24 to 84 months, at which point your car will be paid off. Many dealerships offer their own financing, but you can also find auto loans at national banks, local credit unions and online lenders.

Because when you finance a car it is often a secured loan they tend to come with lower interest rates than unsecured loan options, like personal loans. According to the automotive finance study for the fourth quarter of 2022 by Experian, the average loan rates by credit score are the following.

Credit score	New cars	Used cars
781 to 850 (super prime)	4.75%	5.99%
661 to 780 (prime)	5.82%	7.83%
601 to 660 (nonprime)	8.12%	12.08%
501 to 600 (subprime)	10.79%	17.46%
300 to 500 (deep subprime)	13.42%	20.62%

Types of lenders that offer bad credit loans

Before agreeing to risky terms offered by buy here, pay here dealers, consider other options for financing your vehicle with poor credit. It is wise to prequalify to more than just one lender to ensure you get the best deal for your circumstances. Along with this, consider the drawbacks and advantages that come with each lender type.

Consider the following bad credit lender options when shopping for your next car.

Online lenders: Shopping online allows you to compare and apply for many different lenders all at once. It is also likely that online lenders will offer loan preapproval, which allows you to see your potential rates before you commit to financing. If you prefer the fully online experience, consider a retail and finance combined approach — like Carvana or Vroom.
Banks and credit unions: If you have a relationship with a bank or credit union, it is wise to start there. You will likely save money working with a bank that you have already created trust with. Typically, direct lenders offer assistance either at brick-and-mortar locations or online.
Dealerships: The loans offered directly from the dealer come from a bank or credit union working with the lot. While these are not always the best rates available, it does offer the convenience of a one-stop shop. If the dealer route is right for you, come prepared with competing rates to negotiate the best deal.

Compare the best bad credit auto loan rates in June 2023

Lender	Starting APR	Term
CapitalOne	Not specified	24 to 84 months
Autopay	Not specified	36 to 60 months
Carvana	Not specified	12 to 72 months
iLending	Starting at 4.49%	12 to 84 months

Loan details presented here are current as of May 17, 2023. Check the lenders’ websites for more current information. The auto loan lenders listed here are selected based on factors such as APR, loan amounts, fees, transparency, credit requirements and more.

Best bad credit auto loan lenders in 2023

Best for prequalification

Capital One

4.1

See offers

Apply on partner site

Min. credit score:: 300
Fixed APR From:: Not disclosed
Loan amount:: $5,000– $200,000
Term lengths:: 2 to 7 years
Min. annual income:: Not disclosed

Overview: Capital One offers a fully online experience for new and used purchase loans and refinancing. With no credit requirement, drivers with bad credit can get competitive rates and have the comfort of prequalification.

Why Capital One is the best for prequalification: Applying for prequalification can give you the confidence of a loan offer without the hard credit pull. It provides you with your predicted rate and terms without any impact on your credit.

Pros
No hard credit check

One-stop shop for your loan and vehicle

Prequalification lasts for 30 days
Cons
Limited vehicle inventory

APR range is not disclosed before prequalifying
Who this lender is best for: Drivers who don't mind a limited selection of vehicles and want a large shopping window.

Impact on financial wellness: A soft credit check is used for prequalification. You will undergo a hard credit pull once you fully apply.

Time to receive funds: Capital One borrowers can receive funding as soon as the same day they apply.

Fees: Capital One charges a late fee for loan holders.

Additional requirements: A loan through Capital One cannot be used at any auto dealership. Your vehicle will have to come from one of their 12,000 participating dealerships.

Special features: Done fully online via the Auto Navigator. Once you prequalify current rates and expected monthly costs will be presented for available vehicles.

Best for fully online experience

Carvana

4.4

Read our review

Read our Bankrate review

Min. credit score:: Not disclosed
Fixed APR From:: Not disclosed
Loan amount:: Not specified
Term lengths:: 3 to 6 years
Min. annual income:: Not disclosed

Overview: Carvana is an online car buying and financing option, which allows drivers to purchase from its website. It does not have perfect credit requirements, and you can view loan options without a hard credit pull.

Why Carvana is the best for a fully online experience: Although a loan with Carvana can only be achieved by purchasing from its online vehicle platform, Carvana offers loans with a low minimum annual income requirement of $4,000 — much lower than traditional lenders.

Pros
Prequalification available

No minimum credit requirement

Money-back guarantee
Cons
Limited inventory

Down payment required
Who this lender is best for: A driver already shopping on the Carvana marketplace for a vehicle.

Impact on financial wellness: A hard credit check will happen following planned vehicle delivery.

Time to receive funds: Funding is available as soon as the same day as approval.

Fees: Carvana charges NSF and late fees.

Additional requirements: Even with a low credit score you are eligible if you have an annual income of at least $4,000 and do not have any current bankruptcies.

Special features: Vehicle and loan approval can all be done from the ease of your home and rates are current for 45 days.

Pros and cons of bad credit auto loans

Securing vehicle financing aimed at poor credit borrowers can be an excellent way to get a car but it comes with risks. Consider the benefits and drawbacks of a bad credit auto loan.

Pros

On-time payments can improve your credit score
Lenders tend to carry minimal restrictions
Less stringent credit requirements

Cons

Potentially high interest rates
Higher monthly cost
Likelihood of additional fees

What to know before applying for a bad credit auto loan

All borrowers securing an auto loan should shop around with a few lenders before signing, but that step is all the more important with bad credit auto loans. Generally, the worse your credit is, the higher the interest rates will be. When considering a bad credit lender, pay close attention to restrictions to ensure you qualify for the best rates and terms possible.

As a borrower with poor credit, it can feel enticing to sign off on a longer term to pay less each month. But this is not always the best idea. A longer-term loan will mean more money spent over the entire loan.

Finally, look for lenders that offer prequalification so you can get an idea of possible rates without damaging your credit.

4 tips on how to secure an auto loan with bad credit

It is possible to get a car loan with bad credit, although having bad credit will raise the rates you're offered. If you are having trouble getting approved or finding acceptable rates, try taking these steps:

Make a large down payment. A larger down payment will lower your monthly payment, and it could also help you qualify for better rates because it reduces the amount you have to finance.
Get a co-signer. A co-signer with good credit will take on some responsibility for your loan if you default, but they can also help you qualify for the loan and potentially for a lower rate.
Reduce existing debt. Before applying for an auto loan, pay down as much debt as you can and avoid opening new accounts, like credit cards.
Check your credit report. At least 30 days before you plan on applying, check your credit report. Dispute any inaccurate information to get it removed and boost your score.

What to consider when refinancing your car with bad credit

If you are applying for a refinance loan with poor credit, keep the following constraints in mind.

Vehicle mileage: The number of miles clocked on your vehicle's odometer greatly impacts the value of your car. Lenders' constraints can differ in tens of thousands of miles, so be sure to check for these types of restrictions.
Age of vehicle: Many lenders will not refinance a vehicle that is over 10 years old due to the vehicle depreciation incurred over the life of the loan.
Loan amount: Most lenders present minimum loan amounts for refinance loans. Depending on your financial state, factor in the entire cost you will need.

FAQs about bad credit auto loans

The process of improving your credit takes quite a bit of time. But the stronger your credit is, the better rates and terms you will receive. Some ways to work towards increasing your credit score include:
- Keeping track of your credit score.
- Making payments on time.
- Paying down debt.
- Taking advantage of self-reporting.
- Only applying for loans you can truly afford.
- Not applying for too many different kinds of accounts at once.
Applying for a loan with a co-signer who has excellent credit will greatly increase your likelihood of gaining loan approval. The role of a co-signer serves as an extra layer of protection for the lender. The lender gains security because the co-signer is on the hook for payments if the primary borrower can't make them. Because of this, having a co-signer can earn you a decent rate and term, even if you don't have the best credit.
While this answer varies by specific lender, the better your score is, the better your rates and terms will be. If you have low or no credit, you may still qualify for a loan but should expect a steeper APR. In the fourth quarter of 2022, drivers with scores of 500 or lower received an average rate of 13.42 percent for new and 20.62 percent for used cars, according to Experian.

Fortunately, many lenders are moving away from using credit scores as the sole measure of ability to pay off loans. Instead, lenders are considering factors such as work or education history.
There are still ways to get behind the wheel following an initial denial. Firstly, it is important to take time to improve your credit. Do this by paying down any debt to lower your credit utilization rate. Otherwise, consider getting a co-signer for your auto loan.
When applying for an auto loan, lenders will require proof of income and employment, personal details — date of birth, Social Security number, address and phone number — proof of insurance and vehicle information. It is important to fill out the application completely and correctly to ensure you avoid denial due to errors on the application.
When you have bad credit and no one to stand as your co-signer, it is best to look for lenders that use other factors to measure risk. Many online lenders use education and work history to determine rates and terms, for example.

Methodology

To select the top bad credit car loans, Bankrate considers 18 different factors. These factors include the loan amount, repayment options, acceptance criteria and dealership requirements. Each lender holds a score based on four categories. These categories include:

Availability: This accounts for loan amounts, type, availability in each state, dealership requirements and range of repayment options.
Affordability: Primarily, this section covers expected APR, acceptance criteria, discounts for autopay and the number of fees.
Customer experience: This category includes online access, support availability, shopping window, whether there's an option for automatic payments and app availability.
Transparency: Here prequalification and disclosure of rates and fees are accounted for.