BEST OF

7 Bad Credit Auto Loans of 2022

What is a bad-credit car loan, and where can you apply for one?

Sep 14, 2022

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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.

Bad Credit Auto Loans

Consumers Credit Union
Learn more

on Consumers Credit Union's website

Consumers Credit Union - New car purchase loan

Consumers Credit Union

Est. APR

3.74-17.54%

Loan amount

$7,500-No max.

Min. credit score

620
Learn more

on Consumers Credit Union's website


Min. credit score

620

Key facts

Best for applicants wanting to take advantage of rate discounts and other credit union benefits.

Pros

  • Offers rate estimates through website using a soft credit check.

  • Takes applications online, by phone, in branches or at authorized dealerships in Illinois and Southern Wisconsin.

  • Offers rate discount with automatic payment.

  • Provides online car buying service with discounted pricing and loan preapproval.

  • Allows co-signers.

Cons

  • Credit union membership required to get a loan.

  • No rate discounts if using online car buying service.

  • Social Security number required for online rate estimate.

Qualifications

  • Minimum annual gross income: None.

  • Maximum debt-to-income ratio: Did not disclose.

  • Bankruptcy restrictions: No open bankruptcies.

  • Maximum mileage: None.

  • Maximum loan to value ratio: 125%.

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Autopay - New car purchase loan

Autopay

Est. APR

1.99-17.99%

Loan amount

$2,500-$100,000

Min. credit score

560

Min. credit score

560

Key facts

Best for applicants wanting to see pre-qualified new car loan offers, without affecting their credit scores. Bad- and fair-credit borrowers may qualify.

Pros

  • Offers pre-qualification with a soft credit check.

  • Some network lenders offer rate discount with automatic payment.

  • Borrower can choose loan payment date.

  • Allows co-signers.

  • Customer service available on Saturday.

Cons

  • Loan approval takes 24-48 hours, longer than other lenders.

  • Loan funding can take 1-2 weeks, longer than other lenders.

  • May charge an origination fee. Amount not provided.

Qualifications

  • Minimum annual gross income: Varies by lender.

  • Maximum debt-to-income ratio: 50%.

  • Bankruptcy restrictions: Varies by lender.

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MyAutoloan
Learn more

on MyAutoloan's website

MyAutoloan - New car purchase loan

MyAutoloan

Est. APR

1.99-12.99%

Loan amount

$8,000-$100,000

Min. credit score

575
Learn more

on MyAutoloan's website


Min. credit score

575

Key facts

Best for applicants wanting to quickly receive loan offers from multiple lenders for the purchase of a new or used vehicle from a dealer or private party. Bad- and fair-credit borrowers may qualify.

Pros

  • Applicants can receive up to four lender matches with a soft credit check.

  • Most lenders can provide approval within 30 seconds of application submission.

  • Provides lowest daily rates on website, including new auto purchases.

  • Some marketplace lenders offer rate discount with automatic payment.

  • Allows co-signers.

Cons

  • May result in multiple contacts from different lenders.

  • Social Security number required to submit initial application.

  • myAutoloan.com offers limited customer service support.

  • Not available in a few states.

Qualifications

  • Minimum annual gross income: $26,100.

  • Maximum debt-to-income ratio: Not provided

  • Bankruptcy-related restrictions: Must be discharged or dismissed.

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Carvana
Learn more

on Carvana's website

Carvana - Used car purchase loan

Carvana

Est. APR

3.90-27.90%

Loan amount

$1,000-$100,000

Min. credit score

450
Learn more

on Carvana's website


Min. credit score

450

Key facts

Best for applicants wanting to streamline car buying and financing, and who will qualify for Carvana’s lower tier rates.

Pros

  • Offers pre-qualification with a soft credit check.

  • Customer service available seven days a week.

  • Borrowers can change their payment due date via the Carvana app.

  • Application process 100% online including document upload.

  • Minimum loan amount is lower than other lenders.

Cons

  • Maximum APR possible is higher than many other lenders.

  • Only finances vehicles sold through Carvana.

  • Not available in Alaska or Hawaii.

Qualifications

  • Minimum annual gross income: $4,000.

  • Maximum debt-to-income ratio: Did not disclose.

  • Bankruptcy-related restrictions: No active bankruptcies.

  • Maximum mileage: Did not disclose.

  • Maximum loan to value ratio: Did not disclose.

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Want to compare more options? Here are our other top picks:

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 1 in 6 auto loan borrowers in 2021 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.

Comparing bad-credit auto lenders

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.

2.96%.

3.68%.

Prime: 661-780.

4.03%.

5.53%.

Nonprime: 601-660.

6.57%.

10.33%.

Subprime: 501-600.

9.75%.

16.85%.

Deep subprime: 300-500.

12.84%.

20.43%.

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 September 14, 2022

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NerdWallet's Bad Credit Auto Loans of 2022