Best bad credit auto loan rates for September 2022
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ins and outs of securely borrowing money to purchase a car.
Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to take control of their finances by providing clear, well-researched information that breaks down otherwise complex topics into manageable bites.
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. 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 work history or education.
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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.2Shop 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.3Apply for prequalification.
Applying for prequalification will greatly increase your likelihood of approval and will give you a better idea of what to expect for loan terms and rates.4Submit 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.5Begin 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. It is a good idea to gain at least three quotes before signing off on a loan. Give special attention to the following factors:
1Approval 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.2Interest 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.3Loan 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.4Repayment 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. Keep this in mind when deciding the length of your loan.5Customer service
Consider the benefits of a lender's customer service on aspects such as online availability, face-to-face communication and hours of operation.
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The annual percentage rate (APR) includes your interest rate, plus any loan fees. It reflects the total cost of borrowing. | The period of time until your loan achieves maturity and is paid off in completion. Terms can be expressed in months or years, depending on the details of your loan. | The minimum credit score typically required to qualify for a loan with a given lender. Exact thresholds are not always disclosed by a lender and in certain cases the minimum score is the best estimate based on publicly available information. Credit score refers to FICO 9.0 unless otherwise stated. | |||
|---|---|---|---|---|---|
3.9 Bankrate Score | APR from 2.79% | Term 60mo | Min credit score 680 | Apply on partner site | Apply on partner site |
3.5 Bankrate Score | APR from 7.49% | Term 60mo | Min credit score None | Apply on partner site | Apply on partner site |
3.7 Bankrate Score | APR from 10.99% | Term 36-72mo | Min credit score Not disclosed | Apply on partner site | Apply on partner site |
4.2 Bankrate Score | APR from 3.24% | Term 48-60mo | Min credit score Not disclosed | Apply on partner site | Apply on partner site |
3.9 Bankrate Score | APR from 4.75% | Term 48-60mo | Min credit score None | Apply on partner site | Apply on partner site |
3.2 Bankrate Score | APR from 5.19% | Term 60mo | Min credit score None | Apply on partner site | Apply on partner site |
3.6 Bankrate Score | APR from 6.49% | Term 36-72mo | Min credit score None | Apply on partner site | Apply on partner site |
4.1 Bankrate Score | APR from 2.20- 29.99% | Term 24-84mo | Min credit score Not disclosed | Apply on partner site | Apply on partner site |
4.2 Bankrate Score | APR from 5.63% | Term 48-60mo | Min credit score None | Apply on partner site | Apply on partner site |
4.0 Bankrate Score |
| Apply on partner site | Apply on partner site | ||
| APR from 14.99% | Term 60mo | Min credit score Not disclosed | Apply on partner site | Apply on partner site | |
| APR from 2.74- 14.99% | Term 24-84mo | Min credit score 600 |
The Bankrate guide to choosing the best bad credit auto loans
Why trust Bankrate?
At Bankrate, our mission is to empower you to make smarter financial decisions. We’ve been comparing and surveying financial institutions for more than 40 years to help you find the right products for your situation. Our award-winning editorial team follows strict guidelines to ensure the content is not influenced by advertisers. Additionally, our content is thoroughly reported and vigorously edited to ensure accuracy.
What to know first
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.
Loan details presented here are current as of September 1, 2022. 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.
Compare the best bad credit auto loan rates in September 2022
| Lender | Starting APR | Term |
|---|---|---|
| CapitalOne | Not specified | 24 to 84 months |
| Autopay | Starting at 1.99% | 36 to 60 months |
| Carvana | Starting at 3.9% | 36 to 72 months |
| iLending | Starting at 1.99% | 12 to 84 months |
Best bad credit auto lenders of September 2022
- Best for prequalification: Capital One
- Best for shopping multiple offers: Autopay
- Best for fully online experience: Carvana
- Best for bad credit refinance: iLending
Capital One: Best for prequalification
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 and cons:
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.
| LENDER | Capital One |
|---|---|
| MIN. CREDIT SCORE | Not specified |
| STARTING APR | Not specified |
| LOAN AMOUNT | New and used car purchase: starting at $4,000 Refinance: $7,500 to $50,000 |
| TERM LENGTHS | 24 to 84 months |
| FEES | Late fee |
Autopay: Best for shopping multiple offers
- Several lender options with one application
- Simple application form to speed up the process
- Customer support six days a week
- Maximum APR not disclosed
- Not usable for used vehicle purchases
- Possible down payment requirement
| LENDER | Autopay |
|---|---|
| MIN. CREDIT SCORE | Not specified |
| STARTING APR | New car purchase: Starting at 1.99% Refinance: Starting at 1.99% |
| LOAN AMOUNT | New car purchase: $2,500 to $100,000 Refinance: $2,500 to $100,000 |
| TERM LENGTHS | 36 to 60 months |
| FEES | Varies by lender |
Carvana: Best for fully online experience
- Prequalification available
- No minimum credit requirement
- Money-back guarantee
- Limited inventory
- Down payment required
| LENDER | Carvana |
|---|---|
| MIN. CREDIT SCORE | Not specified |
| STARTING APR | New and used car purchase: Starting at 3.9% |
| LOAN AMOUNT | Not specified |
| TERM LENGTHS | 36 to 72 months |
| FEES | NSF and late fees |
iLending: Best for bad credit refinance
- Assistance from personal lending specialist
- Quick application should only take a few minutes
- Wide range of terms available
- No new or used purchase loans
- Fees are not clearly specified on its website
| LENDER | iLending |
|---|---|
| MIN. CREDIT SCORE | 560 |
| STARTING APR | Starting at 1.99% |
| LOAN AMOUNT | Not specified |
| TERM LENGTHS | 12 to 84 months |
| FEES | Not specified |
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 second quarter of 2022 by Experian, the average loan rates by credit score are the following.
| Credit score | New car loans | Used car loans |
| 781 to 850 | 2.96% | 3.68% |
| 661 to 780 | 4.03% | 5.53% |
| 601 to 660 | 6.57% | 10.33% |
| 501 to 600 | 9.75% | 16.85% |
| 300 to 500 | 12.84% | 20.43% |
3 tips on how to secure an auto loan with bad credit
- 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.
- 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.
Types of lenders that offer bad credit loans
There are many options when it comes to 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 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.
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
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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.
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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.
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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 quarter two of 2022, drivers with scores of 500 or lower received an average rate of 12.84 percent for new and 20.43 percent for used cars, according to the Experian State of the Automotive Finance Market report.
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.
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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.
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When applying for an auto loan, lenders will require proof of income and employment, personal details — date of birth, SSN, 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.
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.