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Car loans for bad credit can be a lifeline for people who need a car but have a poor credit score. There are a number of lenders who specialize in working with borrowers with bad credit, but it's important to understand the options available to you and to shop around for the best rate and terms.

What is a bad credit score?

Credit scores are typically divided into five categories:

  • Excellent: 720-850
  • Good: 670-719
  • Fair: 620-669
  • Poor: 580-619
  • Very poor: Below 580

If you have a credit score below 620, you're considered to have bad credit.

How to get a car loans for bad credit

There are a few things you can do to increase your chances of getting a car loan with bad credit:

  • Shop around and compare rates from multiple lenders. There are a number of lenders who specialize in working with borrowers with bad credit. Be sure to compare rates from multiple lenders before you choose a loan.
  • Get pre-approved for a loan before you start shopping for a car. This will give you an idea of how much you can afford to borrow and what your interest rate will be.
  • Make a larger down payment. A larger down payment will reduce the amount of money you need to borrow and make you less of a risk to the lender.
  • Consider getting a cosigner. A cosigner is someone with good credit who agrees to repay the loan if you default.

What to expect from a bad credit car loan

If you're approved for a bad credit car loan, you can expect to pay a higher interest rate than someone with good credit. You may also be required to make a larger down payment and have a shorter loan term.

Here are some other things to expect from a bad credit car loan:

  1. Higher interest rates: Bad credit car loans typically have interest rates that are 2% to 5% higher than good credit car loans. This means that you'll pay more money in interest over the life of the loan.
  2. Larger down payments: Lenders may require borrowers with bad credit to make a larger down payment, typically 10% to 20% of the purchase price of the car. This is to reduce the lender's risk in case you default on the loan.
  3. Shorter loan terms: Bad credit car loans often have shorter loan terms, typically 36 to 48 months. This means that you'll have to make higher monthly payments, but you'll also pay off the loan sooner.
  4. Fees: Some lenders may charge additional fees for bad credit car loans, such as origination fees, prepayment penalties, and late payment fees. Be sure to ask about all of the fees associated with the loan before you sign anything.

It's important to weigh the pros and cons of getting a bad credit car loan before you make a decision. If you really need a car and have no other way to get one, a bad credit car loan may be your only option. However, it's important to understand the terms of the loan and to be prepared for higher interest rates and monthly payments.

Tips for managing a bad credit car loan

Here are some tips for managing a bad credit car loan:

  • Make sure you can afford the monthly payments. This is the most important tip. Before you take out a loan, make sure you have a budget in place and that you can afford to make the monthly payments on time and in full.
  • Pay more than the minimum payment each month. This will help you pay down the loan faster and save money on interest. Even if you can only afford to pay a little bit extra each month, it will make a difference over time.
  • Set up automatic payments. This will help you avoid missing any payments, which can damage your credit score and lead to late fees.
  • Keep your car insurance up to date. If you don't have car insurance, your lender may be able to force you to purchase coverage through them, which is typically more expensive.
  • Maintain your car. Get regular oil changes and tune-ups to keep your car in good condition. This will help you avoid expensive repairs and make it easier to sell or trade in your car in the future.
  • Consider refinancing your loan when your credit score improves. If you can refinance your loan at a lower interest rate, you can save money on your monthly payments.
Alternatives to bad credit car loans

If you have bad credit and are struggling to get a car loan, there are a few alternatives you can consider:

  • Buy a used car. Used cars are typically less expensive than new cars, and they may be easier to get financed with bad credit.
  • Get a cosigner. A cosigner is someone with good credit who agrees to repay the loan if you default.
  • Borrow from a friend or family member. If you know someone who is willing to lend you money to buy a car, this can be a good option. However, it's important to put the loan agreement in writing to protect both parties.
  • Use a buy-here, pay-here dealership. Buy-here, pay-here dealerships typically don't check credit scores. However, they often charge high interest rates and fees.
  • Use a private seller. If you buy a car from a private seller, you can often negotiate the terms of the sale, including the financing. However, it's important to have the car inspected by a mechanic before you buy it.
How to improve your credit score for a car loan

There are a number of things you can do to improve your credit score for a car loan:

  • Make all of your payments on time and in full. This is the most important factor in your credit score. Even one late payment can have a negative impact.
  • Keep your credit utilization low. Your credit utilization is the amount of credit you're using compared to your total available credit. Aim to keep your credit utilization below 30%.
  • Pay down any outstanding debt. The more debt you have, the more difficult it will be to improve your credit score. Focus on paying down your high-interest debt first.
  • Dispute any errors on your credit report. Review your credit report regularly and dispute any errors you find.
  • Get a secured credit card. A secured credit card is a type of credit card that requires a deposit. This deposit serves as your credit limit. Secured credit cards can be a good way to build your credit history if you have no credit or bad credit.

Once you've taken steps to improve your credit score, it's important to give it time to reflect on your credit report. It may take a few months or even a year to see a significant improvement in your credit score.


Getting a car loan with bad credit is possible, but it's important to do your research and shop around for the best rate and terms. Be sure to read the loan terms carefully before you sign anything and make sure you can afford the monthly payments.

Frequently Asked Questions
What is a bad credit car loan?

A bad credit car loan is a type of auto financing specifically designed for individuals with low credit scores or imperfect credit histories.

Can I get a car loan if I have bad credit?

Yes, there are lenders who specialize in offering car loans to those with bad credit. However, the terms might be less favorable compared to loans offered to those with good credit.

How do bad credit car loans affect interest rates?

Typically, bad credit car loans come with higher interest rates compared to standard loans. This compensates lenders for the increased risk they're taking on.

Are there any specific requirements to qualify for a bad credit car loan?

While requirements can vary by lender, common criteria include proof of income, stable employment, and a minimum monthly income threshold.

What steps can I take to improve my chances of getting approved for a bad credit car loan?

To enhance your approval odds, consider offering a larger down payment, obtaining a co-signer with better credit, or choosing a more affordable vehicle.

How can I refinance a bad credit car loan?

Once you’ve made timely payments for a while and potentially improved your credit score, you can approach lenders to refinance your loan for better terms and rates.

How does a bad credit car loan impact my credit score?

If you consistently make on-time payments, a bad credit car loan can help improve your credit score over time. However, missed or late payments can further harm your score.

Are there any reputable lenders for bad credit car loans?

Yes, there are several established lenders that offer auto loans to individuals with bad credit. It’s essential to research and read reviews to find a trustworthy lender.

What are the average loan terms for bad credit car loans?

Loan terms can vary, but bad credit car loans often have terms ranging from 24 to 72 months, though the specifics depend on the lender and the borrower's situation.

Can I get a bad credit car loan for a used vehicle?

Yes, many lenders offer bad credit loans for both new and used vehicles. However, interest rates and terms might differ depending on the age and condition of the car.

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