Key takeaways

  • Borrowers with bad credit can still get approved for a car loan from certain lenders, such as banks, credit unions and online lenders.
  • It's important to shop around and compare offers from different lenders to find the best deal for your situation.
  • Dealer financing from subprime auto lots or buy here, pay here lots should be a last resort due to high interest rates and potentially predatory practices.

Need a car loan but can’t get approved with a traditional lender due to your credit score? Before settling for a high-cost loan from a bad-credit auto dealership, you should explore other options.

Some lenders offer auto loans for bad-credit borrowers. FICO defines bad credit as scores below 580, though lenders may have their own definitions. If you meet the lender’s other eligibility requirements, you could get approved for a loan with lower borrowing costs. Ultimately, the best car loan for bad credit is the one that offers you the lowest rates and most favorable terms.

Banks and credit unions

Best for those purchasing a more expensive vehicle as these lenders tend to offer financing options for larger amounts.

If you have a bank or credit union account, contact a banker to ask about a bad credit auto loan.

Although some banks have high credit score minimums, others, like Capital One, are more lenient. Your bank may be willing to work with you on the strength of your relationship.

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

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  • 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.
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  • 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

Best for those who feel confident navigating finances online without any extra hand-holding.

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 committing to a loan. 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 Carvana.

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  • 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.
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  • 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.


Best for those who prefer the convenience of purchase and payment all in one place — even with potentially higher costs.

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.

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  • 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.
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  • 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.

What to do if your application is rejected

While it is natural to feel discouraged if your application is rejected, there are ways forward.

  • Check for mistakes: In some cases, denial can occur due to errors in your application. Review your application to ensure you didn’t miss any sections or present wrong information.
  • Contact the lender: Lenders are required by law to share why loans are denied. If the reason for rejection has not been sent within 60 days of applying, request it.
  • Pay down debt: Sometimes lenders will not approve borrowers with a high debt-to-income ratio. Try to get your DTI under 50 percent. Consider a debt consolidation loan to pay down multiple debts at a lower interest rate.
  • Improve credit: One of the most obvious ways to improve future loan approval is to increase your credit score. Do this by checking your report, paying down debt and lowering credit utilization.

Kait Gavin, Cox Automotive’s VP of operations for F&I and titling solutions, presents simple advice for borrowers looking for a bad credit auto loan.

“Be upfront with your dealership,” she advises. “Let them know your credit situation. They can help you.”

While sharing your credit history might feel hard, doing so upfront can help you get a better grasp on your potential rates more quickly.

Best auto loans for bad credit

When searching for the best car loans for bad credit, consider the following bad-credit lenders.

Lender APR from Best for Amounts
Capital One Not specified Auto loan prequalification Starting at $4,000
Autopay 4.67% Comparing offers $2,500-$100,000
iLending 6.59% Refinance Not specified

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.