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What is a bad-credit car loan, and where can you apply for one?
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Last updated on March 1, 2024
Edited by
✅ Fact checked and reviewed
Edited by
✅ Fact checked and reviewed
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A bad-credit auto loan is just a typical auto loan, but it will most likely come with a higher interest rate based on your credit score and other factors. You may also hear bad-credit car loans referred to by other names — such as second-chance or subprime car loans.
Not all lenders offer auto loans for bad credit, so look for lenders with a low or no minimum credit score, or other criteria indicating they work with borrowers who have poor or thin credit. This could be lenders with no minimum income or credit history requirements, or those willing to accept past bankruptcies.
Why trust NerdWallet
- 45+ auto loan products reviewed and rated by our team of experts.
- 30+ years of combined experience covering financial topics.
- Objective, comprehensive star rating system assessing 4 categories and 60+ data points across direct lenders and aggregators.
- Governed by NerdWallet's strict guidelines for editorial integrity.
NerdWallet's auto loans content, including articles, reviews and recommendations, is produced by a team of writers and editors who specialize in consumer lending. Their work has appeared in Nasdaq, MSN, MarketWatch, Yahoo! Finance and other national and regional media outlets. They have also appeared on NerdWallet's "Smart Money" podcast.
Why trust NerdWallet
- 45+ auto loan products reviewed and rated by our team of experts.
- 30+ years of combined experience covering financial topics.
- Objective, comprehensive star rating system assessing 4 categories and 60+ data points across direct lenders and aggregators.
- Governed by NerdWallet's strict guidelines for editorial integrity.
NerdWallet's auto loans content, including articles, reviews and recommendations, is produced by a team of writers and editors who specialize in consumer lending. Their work has appeared in Nasdaq, MSN, MarketWatch, Yahoo! Finance and other national and regional media outlets. They have also appeared on NerdWallet's "Smart Money" podcast.
Bad Credit Auto Loans
Lender | NerdWallet Rating | Est. APR | Loan amount | Min. credit score | Learn more |
|---|---|---|---|---|---|
Auto Credit Express - Used car purchase loan Learn moreon Auto Credit Express' website on Auto Credit Express' website | Not yet rated Best for Finding car dealers with subprime lending Online application | N/A | $5,000-$50,000 | 525 | Learn moreon Auto Credit Express' website on Auto Credit Express' website |
MyAutoloan - Used car purchase loan Learn moreon MyAutoloan's website on MyAutoloan's website | 4.5 /5 Best for Used car loan aggregators Soft credit check Rate discount Same-day decision Co-signers allowed Co-borrowers allowed | 6.24-34.90% | $8,000-$100,000 | 575 | Learn moreon MyAutoloan's website on MyAutoloan's website |
MyAutoloan - New car purchase loan Learn moreon MyAutoloan's website on MyAutoloan's website | 4.0 /5 Best for New car loan aggregators Soft credit check Rate discount No origination fee Same-day decision Co-signers allowed Co-borrowers allowed | 6.29-29.90% | $8,000-$100,000 | 575 | Learn moreon MyAutoloan's website on MyAutoloan's website |
Our pick for
Finding car dealers with subprime lending
Auto Credit Express does not make loans itself, and it did not answer many of the questions we ask of loan aggregators, so it has not received a star rating. But it is worth noting here that this provider will try to match car buyers with low credit scores, bankruptcies or repossessions to dealers who may be able to arrange financing.
on Auto Credit Express' website
Auto Credit Express - Used car purchase loan
Not yet rated
Est. APR
N/A
Loan amount
$5,000-$50,000
Min. credit score
525
Our pick for
Used car loan aggregators
Aggregators connect prospective borrowers with a network of auto lenders, usually resulting in more than one loan offer. We evaluate them using different criteria than direct lenders.
Learn moreon MyAutoloan's website
on MyAutoloan's website
MyAutoloan - Used car purchase loan
4.5
NerdWallet rating
Est. APR
6.24-34.90%
Loan amount
$8,000-$100,000
Min. credit score
575
Our pick for
New car loan aggregators
Aggregators connect prospective borrowers with a network of auto lenders, usually resulting in more than one loan offer. We evaluate them using different criteria than direct lenders.
Learn moreon MyAutoloan's website
on MyAutoloan's website
MyAutoloan - New car purchase loan
4.0
NerdWallet rating
Est. APR
6.29-29.90%
Loan amount
$8,000-$100,000
Min. credit score
575
Our pick for
Used car direct lenders
Direct lenders are banks, credit unions and other companies that work directly with a borrower to make and service loans. We evaluate them using different criteria than aggregators.
Learn moreon Carvana's website
on Carvana's website
Carvana - Used car purchase loan
4.0
NerdWallet rating
Est. APR
7.95-27.95%
Loan amount
$1,000-$125,000
Min. credit score
None
GET MORE QUOTES
on MyAutoloan's website
CarMax - Used car purchase loan
3.5
NerdWallet rating
Est. APR
6.45-28.00%
Loan amount
$500-$100,000
Min. credit score
None
Want to compare more options? Here are our other top picks:
- Digital Federal Credit Union - Used car purchase loan
- Digital Federal Credit Union - New car purchase loan
What is bad credit for an auto loan?
A bad credit score for a car loan is generally defined as in the mid-600s or below. VantageScore and FICO are the two most commonly used credit scoring models, and their scoring tiers differ. Also, some auto lenders use a slightly different FICO model specific to the auto industry.
When deciding whether to approve an auto loan, lenders do consider factors in addition to credit score — such as payment history, steady income, length of employment, amount of debt and loan amount. So, if your credit score falls into the “bad” tier or lower, it’s still possible to get approved for a car loan when other factors are in your favor. You may find more restrictions though, for example a lender may require a shorter loan term.
About 15% of people who financed or leased a car in 2023 had credit scores below 601, according to credit reporting company Experian.
Types of lenders that offer car loans for bad credit
Many different types of lenders offer bad-credit auto loans. When you have bad credit, it’s especially important to apply to more than one lender. Lender requirements vary, and one may be more willing to work with you than another. Also, having multiple loan offers later enables you to take the lowest-rate one to the dealership and ask the finance office to try to beat it.
Banks and credit unions, known as direct lenders, are a good place to start. If you already have accounts in good standing there, they may be more willing to work with you. Direct lenders can be 100% online or have physical locations.
Online loan marketplaces that work with a network of lenders are another option. They provide the convenience of applying to multiple lenders with one loan application.
Online car retailers, such as Carvana, also offer financing for bad-credit borrowers.
Auto dealerships also offer access to bad-credit auto loans. This is where most people find their loans. Finance officers there often have long-standing relationships with banks and credit unions and make either a flat fee or a percentage of the amount borrowed. They also have the ability to adjust interest rates within a lender's guidelines. That's why it’s best to bring your lowest-rate offer from another lender to the table.
Some dealers offer their own in-house financing for bad-credit customers, and borrowers make payments directly to the dealer. These dealerships may advertise "no credit check" or "buy here, pay here." Buy here, pay here loans are typically the most expensive way to finance a car.
» MORE: What is a bad-credit auto dealer?
Comparing lenders that offer bad-credit auto loans
Instead of applying to a random lender, crossing your fingers and hoping you get approved, look first to see if a certain lender makes more sense for you.
For example, not all lenders allow co-signers. So if you think you may need one to qualify for a loan, apply only to lenders that accept co-signers. If you have a limited credit history, or none at all, look for lenders without a credit history requirement.
If one of your goals is to build your credit with an auto loan, ask if the lender reports payments to one or more of the three major credit bureaus — TransUnion, Experian and Equifax. That way, your record of on-time car payments will be available to future lenders.
To compare lenders and rates in a way that won’t affect your already low credit score, look for lenders that allow you to pre-qualify for a loan with a soft credit check. Pre-qualification is also a good way to determine if you will qualify for an auto loan at all.
If you do receive pre-qualified offers and want to compare them, NerdWallet’s auto loan calculator is a helpful tool. You can input the estimated rates lenders have given you, add in down payment or trade-in amount, and see your resulting monthly payment as well as total loan cost.
Borrowers tend to pay more for bad-credit auto loans
Lenders charge higher interest rates, and sometimes more in fees, for a bad-credit auto loan. They do this to compensate for the added risk that a borrower may not pay off the loan.
Typically, a bad-credit borrower can expect to pay a lot more for a car loan. For example, on a $30,000, 60-month new-car loan, the difference in payments between borrowers in the highest and lowest credit tiers would be nearly $9,000 over the life of the loan.
So you have an idea of what rates to expect for bad-credit auto loans, here are average auto loan rates by credit score based on VantageScore.
Credit score | Average APR, new car | Average APR, used car |
|---|---|---|
Superprime: 781-850. | 5.64%. | 7.66%. |
Prime: 661-780. | 7.01%. | 9.73%. |
Nonprime: 601-660. | 9.60%. | 14.12%. |
Subprime: 501-600. | 12.28%. | 18.89%. |
Deep subprime: 300-500. | 14.78%. | 21.55%. |
Source: Experian Information Solutions. | ||
Improving your chances of getting a bad-credit car loan
If you’re concerned you can't get auto loan approval, there are steps you can take to improve your chances of getting an auto loan with bad credit.
Actually, it’s likely that you will find a lender willing to approve a loan for you, regardless of your credit score. Some lenders make loans only to people with bad credit, but usually with a very high rate. The key is to find the lender with the lowest rate possible and a payment you can afford, so you can buy the car you need, make payments on time and build your credit.
If you find your only option is to settle for a high interest rate, then commit to making your payments on time and look into refinancing your car loan at a lower rate as soon as you can.
Last updated on March 1, 2024
Methodology
NerdWallet's review process surveys companies that offer any combination of new car purchase loans, used car purchase loans, auto refinance loans (traditional and/or cash-out) and lease buyout loans. These companies include direct lenders and aggregators; the latter group doesn't have in-house loan products but matches borrowers to third-party lenders within a network. Our aim is to provide an independent assessment of providers to help arm you with information to make sound, informed judgements on which ones will best meet your needs. We adhere to strict guidelines for editorial integrity.
Our survey for direct lenders has different questions than the survey for aggregators, but each includes more than 60 data points. NerdWallet independently confirms product details and, when necessary, follows up with company representatives. At least two writers and an editor verify the facts for every lender review to ensure data are accurate.
To receive a star rating, a provider must respond to NerdWallet’s annual auto loans survey. Star ratings are then assessed from poor (one star) to excellent (five stars).
For more details about the categories considered and our processes, read our full methodology for rating direct lenders and our full methodology for rating aggregators.
NerdWallet's Bad Credit Auto Loans of 2024
- Auto Credit Express - Used car purchase loan: Best for Finding car dealers with subprime lending
- MyAutoloan - Used car purchase loan: Best for Used car loan aggregators
- MyAutoloan - New car purchase loan: Best for New car loan aggregators
- Carvana - Used car purchase loan: Best for Used car direct lenders
- CarMax - Used car purchase loan: Best for Used car direct lenders
- Digital Federal Credit Union - Used car purchase loan: Best for Used car direct lenders
- Digital Federal Credit Union - New car purchase loan: Best for New car direct lenders
