How Do I Get An Auto Loan With Bad Credit?

auto loan with bad credit

So you’d love a new set of wheels, but your credit score is a clunker. Don’t despair — there are things you can do to help put the odds more in your favor at the dealership when trying to get an auto loan with bad credit.

How Do I Get An Auto Loan With Bad Credit? Preparing to Buy

First, make sure there are no mistakes on your credit report bringing down your score. Errors on credit reports are not uncommon, but the only way to find out for sure is to request a copy of your report from one of the three credit reporting agencies. You can request a copy at You’re entitled to one per year from each credit agency. It’s important to read through the entire report and if there are any errors regarding late or missed payments, you should dispute them with each agency whose report they appear on. If the agency cannot backup their claims, they have to correct the report, which can give your score a boost.

As you’re budgeting for the expense of car ownership, remember that your loan payment is not the only monthly costs you will incur. Be sure to calculate the cost of insurance, gas and maintenance when determining what you can afford. You can use this online tool to calculate total fuel costs based on your car’s MPG. And this website lets you research vehicle make and model based on fuel economy.

Finding Auto Loans for Bad Credit

The average bad credit auto loan rate exceeded 10% during the first quarter of 2015, and for deep subprime borrowers the rate was even worse — almost 14%. It may help if you apply for a loan with a bank, credit union or other lender that you already have a relationship with. Look into deals available with your insurance company or an auto club you’re a member of.

Another option is to complete credit applications on a couple of dealers’ websites, You don’t want to apply with tons of dealers over a long period of time because that can hurt your credit score, but if you do manage to get preapproved by a more that one dealership, you may have a little more negotiating power.

Be wary of lenders who specialize in auto loans for bad credit. They may try to profit on the perceived desperation of applicants by offering less desirable terms than may be gotten elsewhere. It doesn’t hurt to look, but be sure to shop around.

When you’re comparing offers for bad credit auto loans you want to pay particular attention to the interest rate and the annual percentage rate or APR, which expresses the interest rate with additional lender fees included (always ask which fees are and are not included, however). When it comes to interest rates, the lower the better.

Come prepared to the dealership. Bring documentation of your income (pay stub), ID, personal references and if you can obtain a reference from a landlord or anyone else you have a good payment history with, that may help you.

Finally, if all else fails and you have a friend or family member who is willing to vouch for you, bring along someone to cosign the loan for you. That person will be fully responsible for the payments if you do not make them, so this is a decision not to be taken lightly by any means.

Making the Deal

Resist the temptation to extend the loan term significantly. While 36-48 month auto loans terms used to be the norm, now nearly a third of car loans are 74 months and longer! While a longer loan term will lower the monthly payment, you will incur significantly higher interest charges over time. If you need a 74 month car loan, consider that you might not really be able to afford that car after all. You want to put down as large a down payment as possible and keep those payments over a short a period of time as possible.

Also, be sure to make sure the terms of your loan are final and not contingent or conditional. Otherwise, you may get the unpleasant news that your payments have increase or a larger downpayment is needed after you thought the deal was done. This has been referred to as the “yo-yo” scam and can cost you big time.

After the Purchase

Once you have your new car, do what you can to prevent any further damage to your score and take steps to improve it by paying your car loan on time every time. Be sure to know your due date and grace period to avoid falling behind.

Automating your payments is a great option that not only is convenient, but will prevent missed payments and credit-damaging late fees. With AutoPayPlus, you can take your car payment, set it and forget it. We’ll take care of the rest and if you use a biweekly payment schedule, you’ll save on interest charges and build equity faster, which can put you in a better position if you trade-in or sell your car early in your loan term.

With biweekly auto payments, we take your regular monthly payment and debit half that amount toward your payment every two weeks. By the end of a year, you’ll have made one extra payment and that’s the key to getting out of debt faster and saving on interest payments. On average our members using AutoPayPlus pay off their loans 5 months faster than those using a conventional monthly loan payment schedule.

Use our free online loan savings calculator to see how what biweekly auto payments could do for you. Or call one of our professional loan consultants and we can explain how you can use AutoPayPlus to save not only on you car loan, but your mortgage, student loans, credit cards and other loans as well.

You can get an auto loan with bad credit if you do some homework beforehand and shop around. Buying a car is a big decision that can impact your financial life for many years. Just because you have bad credit, don’t jump at the first deal offered to you. Be an educated consumer and whatever you do, don’t make a deal you can’t afford — the price you pay in damage to your credit may cost you your financial future.


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