You need a car loan but can’t get approved with a traditional lender. Before settling for a high-cost loan from a bad-credit auto dealership, you should explore other options.

Some lenders offer auto loans to borrowers with bad credit, often defined as scores below 580. If you meet the lender’s other eligibility requirements, you could get approved for a loan with lower borrowing costs. Plus, you could save a bundle in interest and keep more of your hard-earned money in your pocket.

Banks and credit unions

If you have a bank or credit union account, contact a banker to inquire about a bad credit auto loan. Although some banks have high credit score minimums, others, like Capital One, are more lenient. Furthermore, they may be willing to work with you on the strength of your relationship.

You’ll also get a personalized lending experience with a bank or credit union. If they offer brick-and-mortar locations, you can visit a branch to speak with a banker who can assist you with your application for an auto loan.


  • Leniency for established customers: You could have more luck getting approved for an auto loan with reasonable terms if you have a good relationship with the financial institution.
  • In-person support: A banker can speak with you face-to-face regarding your loan application.


  • Stricter guidelines: The minimum credit score requirements could be higher compared to online lenders and bad credit auto dealers.
  • Not a one-stop shop: Once pre-approved for financing, you must visit the dealership or find a vehicle from a private seller.

Online lenders

Online lenders are another viable option for getting a bad credit auto loan. Most offer online preapproval tools that let you view potential loan offers, terms and monthly payments without impacting your credit score. Or you can use an online lending marketplace to shop around with multiple lenders in one sitting, so you’ll know which options are best for your situation.

Either way, you can take these loan quotes to dealerships and try to negotiate a deal on a car or in-house financing. Some may offer you financing with better terms to win your business.

There are also online options that combine the car buying and financing experience into a single transaction. If you prefer a streamlined experience, consider an online platform like Vroom or Carvana.


  • Loan preapprovals: Some lenders offer online preapprovals that don’t impact your credit score.
  • Online comparison platforms: You can also use a loan marketplace to view prospective loan offers from multiple lenders with a soft credit check.


  • No in-person support: When you apply for an auto loan online, you’re limited to phone, email or chat support.
  • Unknown lenders: If you use an online lending comparison platform to find the best deal on auto financing, there’s a chance some of the options may be unfamiliar. (Refer to the Better Business Bureau and Consumer Financial Protection Bureau’s websites to determine if the lender is legitimate.)


Two types of dealers specialize in bad credit auto loans — subprime auto lots and buy here, pay here lots. The former connects you with subprime lenders, while the latter handles financing in-house. Both should only be used as a last resort. Rates are often exorbitant. Some lenders even install tracking devices and shut-off switches to locate and disable the vehicle if you fall behind on payments. These devices make it easier to repossess the car.


  • No credit check: Some bad credit auto dealers offer loans with no credit check to make them more easily accessible to credit-challenged borrowers.
  • Shopping convenience: Buy here, pay here dealers are a one-stop shop for car buying and financing.


  • High borrowing costs: Expect a steep interest rate, which could make your monthly auto loan payment unaffordable.
  • Limited options: You’ll generally be limited to used vehicles if you get an auto loan with a bad credit dealer.

The bottom line

A bad credit score doesn’t mean you must settle for an auto loan with an excessive interest rate and unaffordable monthly payment. Instead, shop around with banks, credit unions and online lenders to determine if there’s a better deal.

It also helps to save up for a down payment before applying to help increase your approval odds. A co-signer with better credit can improve your chances of both approval and decent rates. Most importantly, don’t forget to focus on the terms of the loan you’re offered instead of the monthly payment to ensure you’re getting the best deal.