Best Car Loans For Bad Credit
A quick Google search for the best car loans for bad credit will leave you with countless options for bad credit car financing. But that doesnt mean theyre all the same. Youll find that some loans are better than others due to their rates, terms, and fees.
Below we evaluate some of the best car loans for bad credit borrowers and their various requirements.
Auto Credit Express has a large online network of dealerships and lenders that specialize in car loans for borrowers with poor credit. It strives to help provide new and used cars to those who may not qualify for other financing options.
After you fill out a quick and easy, three-step online loan application, a car dealership will receive and review it. Its finance team will then give you a call in as little as 10 minutes later with preapproved bad credit financing options.
Auto Credit Express offers you the opportunity to secure bad credit auto financing and drive away in your new car that same day. Every month, the network helps an average of approximately 13,000 customers buy the vehicles they thought were out of their reach.
All you have to do is fill out a three-minute loan application to find out if youre prequalified for a car loan. Once youre prequalified, you can visit the dealer directly to explore vehicle options and learn more about the approval process.
Shop Loan Terms Not Monthly Payments
Lower monthly payments look good on paper and are usually used to entice buyers. They may lead to you paying more for your car over the life of the loan since they come with longer terms. Because car loans for bad credit have higher APRs, you may end up paying thousands more than the cars full value by the end of the loan because of interest accumulation.
When youre shopping, look for the most favorable terms usually the lowest APR over the shortest period. That way, you will have more manageable monthly payments with reasonable interest rates. If you cannot find a low APR, consider shopping for a different vehicle.
Repaying Refinancing Your Car Loan
If a lender approves you for a loan despite a poor credit score, try to come up with a repayment plan to minimize the interest charges. Check your loan agreement to see if an early payoff is an option. By making extra payments, you can reduce how much interest accrues, save money, and pay off your debt sooner.
Making regular, on-time payments on an auto loan can help to increase your credit score. As your credit score improves, you may also want to consider refinancing your car loan to get a lower interest rate. With a higher credit score, youll find more attractive rates available.
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Shop With Different Lenders
Shopping around and comparing rates and loan terms across lenders may help you find the best loan for your needs and your budget. If you have bad credit, here are some lenders you might consider.
- Your current bank or credit union If you already have a relationship with a bank or , that can be a good place to start.
- Online lenders Some online lenders and lending platforms specialize in car loans for people with bad credit. They may also allow you to apply for prequalification directly on their websites. If youre prequalified, youll be able to see the estimated loan rate and terms you may qualify for. Just keep in mind that prequalification isnt a guarantee youll be approved for the loan or the estimated loan terms.
- Car dealerships Dealerships typically have relationships with a number of banks and finance companies, which means they may be able to find a lender in their network that will approve you for a loan. Some dealerships also have special financing departments that are dedicated to helping people with poor credit.
- Buy-here, pay-here dealerships If you cant get approved for an auto loan anywhere else and you need a car, a buy-here, pay-here dealership could be an option but consider it a last resort. These no credit check dealerships offer their own loans to people with bad credit and their interest rates tend to be much higher than those offered by banks and other lenders.
How Can I Get A Car With Bad Credit And No Cosigner
Most of the online lending networks above allow you to submit a loan request without incurring a hard inquiry that can potentially lower your credit score. That means you can apply through multiple lending networks without damaging your credit.
This is important to note because it allows you to shop around for a loan without leaving a trail of inquiries on your credit profile. It will also give you an idea of your available loan options.
With this information, you can gauge whether you can qualify for a loan on your own or if you will need a cosigner.
In many cases, lenders will accept your loan request even if you have bad credit. With so many online lenders competing for your business, a credit score that once would not have qualified for a loan is now acceptable to many lenders.
While you will likely have a higher interest rate and lower loan amount than someone who has good credit, the increased cost may be worth it for the safety and security of having your own ride.
If an online lender provides a loan offer that matches your needs, you can accept the deal and begin the process of completing the official loan paperwork. This can often take place online in a matter of hours.
If you have recent late payments or collection accounts, you may have to consider a cosigner to get the best deal possible.
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Good For Interest Rate Discounts: New Roads
New Roads offers interest rate discounts on certain pre-owned and new car models that could reduce your overall interest payments. And if youre struggling to come up with a down payment, its good to know that New Roads doesnt require one.
Read our New Roads auto loans review for more information.
Fico Score Factors And Percentage Of Credit Score
How To Increase Your Credit Score
If you can take some time to postpone financing a new vehicle, work on some of the following things to raise your score:
- Make sure all bills are paid up to date.
- Refinance loans that have high interest rates.
- Focus on paying down your smallest debts first.
- Consolidate debts into one monthly payment with lower interest.
- Dont close credit cards or charge accounts after you pay them off.
- Avoid hard inquiries on your credit report unless absolutely necessary.
- Shoot for using 30% of your available credit or less. You can try increasing your current credit limits to do this.
- Review your full credit report and look for any errors to resolve. You can get a free report from each credit bureau every year.
- If you can open a new credit card with good terms , do this to raise your total credit limit. But, only charge what you can pay off each month.
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Know The Difference Between Interest Rates And Apr
You may see online lenders and others use the terms interest rate and APR in similar ways. But its important to understand the difference.
Interest rate refers to only the rate of interest that a lender charges on a loan. APR, on the other hand, includes taxes, fees, and other costs that are rolled into your loan in addition to the interest rate. Make sure you are comparing the same figures when you compare loan offers from multiple lenders.
Top 3 Bad Credit Car Loans
Lenders today have made it easier than ever for consumers to apply and receive a bad credit auto loan. Instead of dressing up and heading down to a bank and hoping to impress a loan officer, you can now apply for an auto loan without even getting out of bed.
With the online lenders and lending networks below, you can submit a short loan request form and receive a credit decision in a matter of minutes. If you qualify, you can start the shopping process and, in some cases, have keys in your hand by the end of the day.
MyAutoLoan.com partners with lenders that offer consumers a wide array of auto financing options including refinancing options, new and used car loans, and lease buyouts.
Once you submit a short prequalifying form to the network, you can receive an email with up to four auto loan offers in a matter of minutes. Be sure to carefully study each offer because they all contain a unique loan term, payment amount, and annual interest rate.
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What Is A Vehicle Loan For Bad Credit
A bad credit loan is a car loan meant for people with weak credit or little to no credit history at all. Well go over the types of credit scores needed in the next question, but car buyers should know that lenders expect applicants to have credit problems.
Bad credit financing starts as any other loan would, by filling out a loan application. A bad credit auto loan can sometimes be funded more quickly than it would take to fund other loans. Sometimes funding is available as fast as within 24 hours of applying.
The lending networks we recommended help consumers for free through online prequalification applications that can take 30 seconds to a few minutes to complete, sometimes without a credit check.
If lenders decide to work with you, the lending network will give you its information to continue the loan process. The direct lender will likely perform a credit check.
Having poor credit doesnt mean your loan application will be denied. It will likely mean paying a higher interest rate on the loan.
Even with a low credit score, you may be able to boost your chances of approval and get a better interest rate by adding a cosigner to the loan or increasing your down payment on the vehicle.
Some bad credit lenders require borrowers to work with specific car dealerships within their lending networks. Others are direct lenders that will give you a loan and then let you decide where you want to buy a car.
Advantages Of Auto Refinancing
The biggest advantage of refinancing an existing auto loan is that you can lower your monthly payment by choosing a refinance loan with a lower APR than your current one or a longer payoff period. In some cases, you can lower the overall cost of your vehicle loan.
Just remember that extending your repayment window can lower your monthly payment, but add several months of interest charges that make the overall loan cost greater.
Some lenders, such as RoadLoans.com, offer cash back refinancing options that allow you to tap into your current auto loans equity and borrow your cars full Blue Book value. That means that you can use part of the refinance loan to pay off your existing debt and use the remainder of the loan in any way you choose.
Before you pick a loan and lender especially one that touts that it can save you money check for any processing costs or closing fees that can make the loan as expensive than your current loan.
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What Should I Do To Improve My Credit Score Before Applying
Improving your credit score is one of the best things you can do to get a better loan term and an affordable payment amount. A higher credit score will often lead to lower financing costs, including a lower interest rate for the loan, and is seen by lenders as a significant factor in your ability to repay the loan.
It can take months to raise a bad credit score. Some things that can help raise your credit score so you dont have to rely on bad credit auto financing to buy a car include:
- Pay your bills on time.
- Use less of your available credit, ideally no more than 30%.
- Keep credit accounts in good standing and keep them open for years.
- Limit how often you apply for new credit accounts.
- Get various types of credit, including a home loan, auto loan, and credit cards.
The first thing to do is check your credit reports and fix any problems with them. These can include simple errors such as a misspelled name to more complicated issues, such as a bill listed as unpaid that you paid on time and in full.
You can get free copies of your credit report at AnnualCreditReport.com, which is the only source of free credit reports authorized by federal law.
Car Loan For Bad Credit: Conclusion
If you have bad credit, you still have options for a car loan. You can get bad credit car loans from a number of banks, credit unions, dealerships, and online lenders. Typically, youll pay a higher interest rate. However, you dont have to settle for the first offer you come across, and its always a good idea to compare multiple options.
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Assess Your Income And Debt
Even if you have a low credit score, lenders will also look at your monthly income against your monthly expenses to weigh your ability to repay a loan. They want to see that you can make the new monthly car payments in addition to your existing debt obligations.
This will help the lender determine whether to issue the loan and how much interest, additional fees or down payment might be required to secure the loan. The higher the risk, the more you will pay in loan fees.
So before you apply for a loan or go car shopping, total your monthly debt against how much income you receive to get a better idea of how much you really can afford to pay per month.
How Are Money3’s Bad Credit Car Loans Different From Other Lenders
At Money3, we will give you a fair go1, so it may be easier than you think to get approved for a bad credit car loan. Your bank and other car loan brokers may regard bad credit history as too much of a risk and will often reject your loan application without considering every factor. We will look at your individual financial situation when reviewing your loan application and will do our best to make sure that your repayments are reasonable and affordable to you. In some cases, we may offer same day approvals.
Money3 is a responsible lender regulated by ASIC. Our Australian Credit Licence Number is 389 067.
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Tips On How To Secure An Auto Loan With Bad Credit
Trade In Your Current Vehicle
If you have a car and you’re hoping to replace it, you may be able to trade your current vehicle to a dealership for credit towards a new car. This can help you get your foot in the door, even with a low credit score.
In some ways, you can think of your trade-in as a down payment on the new car. Once you count that amount towards your new car, you’ll just need to take out an auto loan to cover whatever is left in the difference between the prices of the two cars.
To determine how much your current car is worth, check out Car and Driver’s trade in tool calculator. Many offer online tools you can use to value your trade for free and from the comfort of your own home. Alternatively, you can look for other trade value tools online or bring your car into a mechanic or dealer to get it appraised.
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Will Dealers Limit The Selection Of Cars If I Have Bad Credit
Its a good possibility. According to the used car dealership DriveTime.com, its not uncommon to hear stories about people with bad credit being shown a different selection of cars from other buyers. Ask the dealer in advance if you will have any vehicle restrictions and what type of car you can expect to qualify for.
How Much Of A Car Loan Can I Get With Bad Credit
Every lender sets its own approval and lending standards. Unfortunately, lenders dont always publicize those standards, so its hard to say exactly how much you may qualify for.
But you can control some factors that play into your loan amount to possibly increase the approved loan amount:
Remember that a larger loan means higher payments and more interest charges. Make sure you only borrow as much money as you can comfortably pay back through monthly installments. If you purchase more car than you can afford, you will end up in a situation where you will struggle to make your monthly payments which can make your bad credit even worse.
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