Having bad credit, or a credit score below 580, can limit your options when looking for a car loan. But it’s still possible to find financing if you don’t have time to improve your credit first. In fact, many of these car loan providers specialize in car loans for borrowers with bad credit. But watch out for steep rates and high fees.
We compared the rates, terms and services available through car loan providers that accept bad credit. Since many bad credit options are available through local lenders and dealerships, we included multiple connection services to make sure we covered the most options.
5 best car loans for bad credit
Best for buying a car completely online
Carvana is one of the only places where you can buy and finance your car online. After you get approved, you can take as long as 45 days to pick a car. And you have the option to return the car and the loan within seven days of getting your vehicle without charge. The downside is you can only use this financing through Carvana — which only offers used cars. And rates can reach a relatively high 27.9%.
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Pros
- Long 45-day preapproval
- Return car at no cost in seven days
- Low $4,000 annual income requirement
Cons
- No new car financing
- Difficult to negotiate a better deal
- Can't use financing outside Carvana
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| Loan amount | Not stated |
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| APR | 3.9% to 27.9% |
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| Minimum credit score | No minimum credit score |
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| Loan term | 1 to 6 years |
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| Loan amount | Not stated |
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| APR | 3.9% to 27.9% |
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| Minimum credit score | No minimum credit score |
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Read review
Best for comparing lenders that accept bad credit
This online connection services works will all credit types and can help you find a new or used car. Its network of lenders are also upfront about costs so you can easily make a quick comparison. Loans start at a high $8,000, so look elsewhere if don't plan on spending that much on your car.
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Pros
- New and used car loans
- Only requires 550 credit score
- Partners are transparent about costs
Cons
- No loans under $8,000
- Strict minimum income requirement
- Complaints about marketing materials
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| Loan amount | $8,000 – $100,000 |
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| APR | Starting at 2.15% |
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| Minimum credit score | 550 |
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| Loan amount | $8,000 – $100,000 |
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| APR | Starting at 2.15% |
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| Minimum credit score | 550 |
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Best for financing a used car
CarMax used car financing
This used car dealership offers in-house financing with a turnaround as fast as the same day. You can take seven days to test drive a car and three days to decide if you want to to return your car at no cost. It's not transparent about rates. However, with a credit score below 580, you can expect a rate around 20% APR or higher.
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Pros
- Same-day financing available
- Seven-day test drive period
- Three-day window to return loan
Cons
- Only available for CarMax cars
- Potentially high rates with bad credit
- Might require in-person application
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| Loan amount | Not stated |
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| APR | 3.5% to 20% |
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| Loan term | 3 to 6 years |
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| Loan amount | Not stated |
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| APR | 3.5% to 20% |
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Read review
Best for refinancing
LendingClub Auto Refinancing
This peer-to-peer lender only offers refinancing. It works with vehicles as old as 10 years with 120,000 miles or fewer. But your balance must be at least $5,000 or higher and your loan must have at least two years left to the term to qualify. It also isn't available in every state.
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Pros
- Accepts 10-year-old vehicles
- Works with up to 120,000 miles
- Accepts cosigners
Cons
- Minimum $5,000 balance
- Requires at least two years left on term
- Takes as long as 14 days
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| Loan amount | $4,000 – $55,000 |
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| APR | 3.99% to 24.99% |
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| Minimum credit score | Fair or better credit |
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| Loan amount | $4,000 – $55,000 |
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| APR | 3.99% to 24.99% |
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| Minimum credit score | Fair or better credit |
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Best for when you’re recovering from a bankruptcy
Auto Credit Express Car Loans
Auto Credit Express is a connection service that works with borrowers who are recovering from a bankruptcy. Its partners offer a wide range of financing, including new, used, private party and rent-to-own loans. Borrowers with bad credit typically qualified for rates around 10% to 13% — low compared to other bad credit options. But they might get much higher if you're more recently bankrupt.
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Pros
- Private party and rent-to-own loans available
- Reltively low rates for bad credit
- Works with recently bankrupt borrowers
Cons
- Potentially high rates with bankruptcy
- High monthly income requirement of $1,500
- Will receive calls from lenders
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| Loan amount | Not stated |
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| APR | Varies |
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| Minimum credit score | 300 |
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| Loan term | 3 to 6 years |
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| Loan amount | Not stated |
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| APR | Varies |
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| Minimum credit score | 300 |
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Read review
Summary of best auto loans for bad credit
| Carvana | Buying a car completely online | A long preapproval period of 45 days and seven days to return a vehicle at no cost. | 3.9% to 27.9% | |
| myAutoloan.com | Comparing lenders that accept bad credit | A network of new and used car financing providers that are transparent about costs | Starting at 2.15% | |
| CarMax | Financing a used car | Same-day approval and seven days to test drive a vehicle | Not available | Read review |
| LendingClub | Refinancing | Accepts 10-year old vehicles with up to 120,000 miles | 3.99% to 24.99% | |
| Auto Credit Express | Borrowers recovering from a bankruptcy | Accepts borrowers with. bankruptcy on credit report | Not available | |
What rates can I expect with bad credit?
Generally, borrowers with bad credit can qualify for rates between 10% and over 20%. The rate you get can vary depending on if you buy a new or used car and how low your credit score actually is.
| 501–600 | 17.78% | 11.3% |
| 300–500 | 20.67% | 13.97% |
Source: Experian State of the Automotive Market, Q2 2020
Your rate also depends on your financial health outside of your credit score. If your credit score is low but your income is steady and you have few debts, you could potentially qualify for a lower rate. But you still probably won’t qualify lenders that offer the lowest rates, like LightStream.
But if you have a bankruptcy or foreclosure on your credit report, you might get an even higher rate. If you can qualify at all.
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Select your credit range and the state you live in for more personalized options.
How to get a car loan with bad credit
The process for getting a car loan with bad credit isn’t too different from getting one with good credit. The main difference is the first step.
- Take quick steps to improve your credit. Paying down your credit card debt or other loans can quickly get you in better shape to qualify for a car loan.
- Set a budget. Come up with a limit to how much you’re willing to spend on the car, how much you can afford for the down payment and how much you can pay each month.
- Compare multiple lenders. Using a connection service that specializes in bad credit financing can help you quickly get an idea of what rates you’re eligible for, but you might not want to just stick to one — many of these are limited to their network of partners.
- Compare offers. Apply for preapproval with a few providers to see what rates and terms you’re eligible to qualify with. If they run a hard credit check, make sure to keep your applications within a few weeks to avoid hurting your credit score.
- Review and sign your documents. Go over the terms and conditions of your loans and when your first payment is due before signing off on the loan.
Are there car loans for no credit?
Yes, there are car loans available if you have no credit or a limited credit history. Many of our top picks for borrowers with bad credit will work with borrowers who don’t have credit. This means that you should expect higher rates and more strict loan terms — including limits on how much you can borrow.
Like with bad credit, you may also want to apply with a cosigner and have a large down payment saved to help increase your chances of being approved for a loan. If you don’t need a car loan immediately, you may also want to consider smaller loans and credit cards to help build your credit. Be cautious when applying, however. Too many recent credit checks and new loans could make it more difficult to find a car loan in the future.
7 tips to qualify for a car loan
Getting a car loan with bad credit is a lot like getting any other type of car loan. However, you might have to work a little harder to find the best deal.
- Save for a down payment. The best way to show a lender you’re serious is to have a down payment saved up. Most experts recommend having at least 10% of the car’s value before you buy, but 20% can help you borrow less — and potentially at a lower rate.
- Start with a connection service. Using a connection service like LendingTree or RoadLoans.com can help you quickly compare offers from multiple lenders and make it easy to understand the ranges of rates you’re generally eligible for.
- Apply with a cosigner or coborrower. Bringing on someone with a higher credit score can increase your chances of approval for a loan. And if you plan on sharing the car, you’ll share the responsibility of paying it off.
- Check your credit report. A mistake on your credit report can cost you points on your credit score. You can get a copy of your credit report for free and contact the creditor to fix any errors.
- Get preapproved. Dealerships tend to offer high rates — especially when you have bad credit. By applying for preapproval with a lender before you visit the dealership, you’ll have the upper hand when it comes to negotiating your terms.
- Read the fine print. Many states have limits on car loan APRs, and some bad credit lenders try to sneak around these by tacking on overpriced add-ons in the contract.
- Ask an expert. Worried you won’t qualify? Sign up for a credit counseling session to have an expert guide you through your options. Find a legit credit counselor on the Department of Justice’s website.
Avoid these mistakes
Make sure you know exactly what you’re getting into before you sign up for a car loan — or any loan. If you don’t do your research, you could find yourself in a financial nightmare, or worse — in a scam.
- Going over budget. Work out how much money you’ll be paying back over the course of the loan to get an idea of how much you’ll spend on your vehicle — is it worth it, and more importantly can you afford it?
- Not checking reviews. Check review sites, messages boards and car enthusiast websites to see what other people have to say about certain lenders. If you know someones who’s been in a similar position when financing a car purchase, ask them.
- Extremely long loan terms. Some lenders offer loan terms of six and seven years that can accrue major interest over time. Sure, the monthly payments will be lower, but if it’s not absolutely necessary, it should be avoided to save money.
- Being unprepared. Check your credit score before you do any car shopping so the dealer or lender can’t take advantage of you. Also, by knowing interest rates that other lenders offer, you’ll be able to compare and find the most competitive deal.
- Making an impulsive purchase. Of course your dream car is out there. But if you have poor credit, it may have to wait so you can buy a car you can afford — and has lower rates.
- Falling for a scam. There are some common scams and tactics you should be aware of when you’re shopping for a car loan. Don’t let a predatory lender push you into making the wrong financial move.
Negotiate a better deal
If you’ve gotten preapproved for a car loan, you’re in a good spot — even if you have bad credit. You won’t have to rely on the dealership to finance you, so you can negotiate the price of your car and any other features without worrying if you can afford the car.
Best of all, you may be in a position to get an even better deal. Your sales person might be willing to match the interest rate or terms you have with your current lender.
Your sales person might also try to throw in extra and incentive. Be wary. Many of these, like an extended car warranty, will cost you much more than they’re worth. Negotiate the price of the car and the terms of financing, and only go for extras if you think you’ll really use it.
Alternatives to consider
The best alternative to a car loan is to build your savings. Or, work toward improving your credit score to help get a better interest rate in the future.
If you can’t wait, you could potentially borrow a personal loan to buy a car or consider using a credit card to buy a car. These both come with their own risks, so consider your options carefully before borrowing.
Compare car loans for bad credit
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Frequently asked questions
I have bad credit. When do I need a cosigner to qualify for a car loan?
You may be able to qualify for a car loan without a cosigner if other aspects of your application are strong, such as having a consistent income and large down payment saved up.
When is a bad credit car loan actually the right solution for me?
It depends on your credit rating, the type and cost of the car you are looking to buy and your financial situation. Be sure to make through comparisons and don’t neglect other alternatives such as using a credit card to pay for a low-cost car.
How do I choose a reputsble lender?
Do your research. Get online and see what other people are saying about their experiences with different lenders. Talk to people you know who have applied for bad-credit car loans, and read all the terms and conditions.
You might also want to start your search with community development financial institutions (CDFIs) like Capital Good Fund, which often offer lower rates to poor-credit borrowers than online lenders.
What fees are involved that might be different from bigger banks?
Monthly account fees and origination fees can significantly increase the amount you have to pay back. Some loans will also include a fee for early repayment, so make sure you know the ins and outs of your loan.
I currently owe under $3000 on an auto loan. Unfortunately, the lender is no longer functional. Is it possible to roll that loan into a new loan?
Hi Candace,
Thanks for getting in touch with Finder. I hope all is well with you. :)
It is possible depending on what your terms and conditions stipulate. Generally speaking, even if your lender goes out of business, you would still need to pay your loan obligation. In most cases, your loan would be sold to another lender and then you would pay to the new lender.
It is best to speak to your lender to know if you can roll that loan to another loan.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua