Bad Credit Auto Loans

Having bad credit doesn’t mean you are shut out from options for a new or used car. Bad credit auto loans with reasonable interest rates can be difficult to find, but it isn’t impossible. There are many lenders who specialize in loans to those with poor credit or even bankruptcies.

Here we will list several options from auto loan providers who provide auto loans for drivers with low credit, no credit, or bankruptcy. Before we get to that, however, we will also provide some information on how to improve your credit quickly, how to apply for a loan with bad credit, and what a reasonable car loan could look like.

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Best Auto Loan Provider for Bad Credit

These are the best providers for bad credit loans for automotive purchases. Most specialize in new and slightly used vehicles and most have several requirements such as minimum incomes and credit scores. We’ll include those here. Our listings are in alphabetical order as the best fit for your needs may not be the best fit for another.

Auto Approve

Loan refinancing specialists. Requires a minimum credit score of 580 and an annual income of at least $18,000.

Headquartered in Minnesota, Auto Approve has been in business for over 40 years and matches buyers with lending partners and financiers like banks and credit unions. Auto Approve, however, is largely a loan refinancing company rather than a new purchase financier, but may be an option for those who are looking to replace a high-interest loan.

Pros and Cons

  • Lower interest rates compared to most.
  • Easy application process with multiple matches as a result.
  • Customer service has a high reputation.
  • Does not offer vehicle purchase loans.

Auto Credit Express

Loan broker which finds loans from various lenders to match the borrower’s needs. No minimum credit score requirement, but does require an annual income of $18,000 or more.

Based in Michigan, Auto Credit Express is a loan broker specializing in automotive purchase loans. In business over 20 years, the company finds matches for loans for struggling buyers and is often utilized by dealerships for finding bad credit auto loans. There is typically a finder’s fee paid to Auto Credit Express, generally a percentage of the total loan or part of the interest rate, and that fee is usually added into the loan amount.

Pros and Cons

  • High Better Business Bureau rating (A+).
  • Offers financing even for those with very low or no credit.
  • Has military rates.
  • Online reviews are mixed.
  • Customer service geared largely towards dealerships.

Capital One

One of the more well-known lenders, Capital One has banking offices nationally. There is no minimum credit requirement for an automotive loan, but the borrower must have $18,000 in provable income.

Capital One is a banking and credit company based in Virginia. Founded in 1994, Capital One specializes in loans and lines of credit (including credit cards) for those with poor, marginal, or good credit. Capital One is also the second-largest automotive finance company in the U.S. Those in Alaska or Hawaii, however, are not eligible for auto loans through Capital One.

Pros and Cons

  • Easy pre-qualification process with no hard credit check.
  • Low minimum requirements to get a loan.
  • Some vehicle types and brands are not included, depending on loan location.
  • Not available in Alaska or Hawaii.

Clearlane

Clearlane, which is a part of Ally Financial, which includes bank branches and other financial services, offers lower interest loans than some. Requirements are more difficult, however, with a minimum credit score of 580 and a minimum annual income of $24,000. New purchase loans may not be available without higher qualifications.

Clearlane is based in Michigan and was originally part of General Motors Acceptance before being purchased by Ally Financial. Clearlane has been in business more than 100 years. Clearlane offers purchase and refinance loans across the U.S. with the exception of Nevada.

Pros and Cons

  • No hard credit check during pre-qualification.
  • Offers guaranteed asset protection (GAP) insurance and vehicle service contracts.
  • No application or prepayment costs.
  • Not available in Nevada.
  • Customer service may be slow.
  • New purchase loans only available to those with higher qualifications.

myAutoloan.com

A loan broker with a network of lenders, myAutoloan.com is a finance service provider, but not the actual lender for the loan. Minimum requirements are relatively high, with a credit score of 575 or higher and an annual income of at least $21,600 as prerequisites.

Over 15 years old, myAutoloan.com is headquartered in Texas and offers loans to the 48 contiguous states. Specializing in low credit loans, the company finds best offers from various lenders with only one credit check and guarantees those offers for a set amount of time.

Pros and Cons

  • One-stop loan aggregation with one credit check.
  • Private purchase loans available.
  • High customer service reputation and BBB rating.
  • Not available in Alaska or Hawaii.
  • Higher minimum requirements to be considered.

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How Can I Get a Bad Credit Auto Loan?

To start with, most auto loans, no matter whether they’re for bad credit or not, require some kind of proof of income. If you make more than $18,000 a year and have proof of income such as W2 forms from a job, it’s likely that you can get an auto loan. If your credit score is 600 or better, you can likely get a car loan at most dealerships or through most banks. But it pays to shop around as interest rates could be high.

Be aware, however, that shopping around and generating a lot of hard credit checks could hurt your credit score. So prequalification or using a service (which most dealerships and some loan companies listed here offer) is a good idea.

What Can I Do To Improve My Interest Rate?

The fastest way to reduce interest rates on your loan is to start with a substantial down payment. If you can put down 10 percent or more of the purchase price, you can likely reduce your interest rate by more than one percent–sometimes two or three percent or more.

Another way to improve credit and reduce those rates is to clean up your credit report before shopping for a car. Do this by requesting copies of your credit reports from each of the three reporting bureaus. This is free once per year and it does not affect your credit score to do so.

Simply go to the Equifax, Experian, and TransUnion online and request the report through their website portals. If there is anything on your report that is incorrect or which you believe to be paid off but still showing, challenge the listing through the processes offered at each credit bureau. Within a month or two, many of these will resolve as the companies that reported update the record or fail to respond within the allotted time, thus defaulting to your favor. It’s not unusual for paid loans or credit cards to be slow in updating records to improve your score.

Understanding Interest Rates

A loan is not free money. There is a payment made over time that eventually becomes more than the original loan as the lender makes interest on what's been borrowed. The worse the borrower’s credit is, the higher the interest rate will be. Some loans allow the borrower to pay them early and reduce the total interest being paid. This is unusual in high-rate loans to those with poor credit, however, so read the fine print carefully.

A typical high interest rate for a bad credit car loan is around 14.59%. The 14.59% refers to the annual percentage rate (APR) paid, calculated monthly. A $15,000 car loan at 14.59% will typically cost the borrower $6,218 over 60 months for a total payment of $21,218. Improving the APR to 11.03% reduces that significantly: $19,582 in total or $4,582 in interest. The lower the interest, the lower the total cost of the loan.

One way to reduce interest rates is to raise the payment by shortening the loan. Instead of a 60-month (5 year) loan, a 36-month (3 year) loan could have the same interest rate but have a far cheaper total cost. But it will have a much higher monthly payment. Taking those two years of payments away, however, reduces our 14.59% loan cost to $3,611 – cutting the interest cost almost in half. For the 11.03% loan, the total interest becomes $2,687. Monthly payments for each loan go up by about $100-150, depending on calculation.

Read more on the 7 Best Auto Loans in the industry today.

Read more on 10 Common Mistakes to Avoid When Getting an Auto Loan here.

FAQ

My credit score is very low. Can I still get a car loan?

Yes. Some lenders specialize in very low or no credit loans. Interest rates are higher, however, and the loan could come with strict requirements for repayment.

I have a bankruptcy on my credit. Can I get an auto loan?

Yes, you can. Most lenders who specialize in low credit loans also offer loans for those with an active bankruptcy on their credit score. Once the bankruptcy is lifted, you may qualify for better interest rates or a refinance.

Can I get a car loan with a credit score of only 300?

It is possible to get an auto loan with a very low credit score like 300 or 450. Offers are limited, however, and finding an interest rate below 20 percent will be difficult. If you can, improve your credit score with the tips above before applying.

Editor's note and disclaimer: Car Talk is supported by our fans, readers and listeners. When you click on some of the links on our website, we may receive referral compensation. However, you should know that the recommendations we make are based on our independent editorial review and analyses.