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Having bad credit does not mean you cannot get a car loan. It means your options are more limited and your interest rate will be higher. But with the right approach, you can get approved, manage the cost, and even use the loan to rebuild your credit.
What Counts as Bad Credit for a Car Loan?
Lenders use your credit score to assess risk. Here is how credit tiers typically break down for auto loans:
- Subprime (501 to 600): Approval is possible but rates are high — often 13% to 18% APR
- Deep subprime (300 to 500): Very limited lender options. Rates often exceed 20% APR
- Near prime (601 to 660): More options available. Rates typically 9% to 12% APR
Even with a low score, you have options. The key is knowing where to look and how to structure the loan.
Where to Get a Car Loan with Bad Credit
Credit Unions
Credit unions are often the best choice for bad-credit borrowers. They tend to have more flexible underwriting than banks. They also look at your full financial picture, not just your score. Join a credit union before you need a loan — most have easy membership requirements.
Banks
Some regional banks offer auto loans for subprime borrowers. Your chances improve if you already have an account with them. Call your bank and ask about their minimum credit score requirements before applying.
Online Lenders
Online marketplaces like myAutoLoan and Autopay connect bad-credit borrowers with multiple lenders. One application returns multiple offers. This saves time and limits hard credit inquiries.
Buy Here, Pay Here Dealerships
Buy here, pay here (BHPH) dealers finance the loan themselves. They often advertise “no credit check” approval. The downside: interest rates can reach 25% to 30%, and many BHPH dealers do not report payments to credit bureaus. That means the loan will not help your credit score.
BHPH is a last resort. If it is your only option, make sure the dealer reports to the major credit bureaus.
Down Payment Strategies for Bad Credit
A larger down payment does two things for bad-credit borrowers:
- It reduces the loan amount, which lowers your monthly payment
- It reduces the lender’s risk, which can improve approval odds
Aim for at least 10% down. If you can do 20%, even better. On a $15,000 car, a $3,000 down payment makes a real difference in the loan terms you are offered.
If you do not have cash for a down payment, consider trading in your current vehicle if it has value. You can also negotiate a lower vehicle price to reduce the loan amount.
Tips to Get Approved with Bad Credit
- Apply with a co-signer. A co-signer with good credit can help you qualify for better terms. The co-signer agrees to be responsible if you stop paying.
- Choose a less expensive car. A smaller loan is easier to get approved for. Avoid buying more car than you need.
- Get pre-approved before visiting the dealer. Knowing your rate helps you negotiate and protects against dealer markups.
- Check your credit report first. Errors on your report can hurt your score unfairly. Dispute any mistakes before you apply.
- Avoid long loan terms. Longer terms mean more risk of going underwater on a bad-credit loan.
What to Expect from a Bad Credit Car Loan
Be realistic. A bad-credit auto loan will have:
- A higher interest rate than borrowers with good credit
- Possibly a shorter maximum loan term
- Stricter requirements around vehicle age and mileage
- Possible GPS tracking or starter interrupt devices (common with subprime dealers)
Plan your budget carefully. Use our auto loan rates guide to understand what rates look like across credit tiers.
Using a Car Loan to Rebuild Your Credit
A car loan is one of the fastest ways to build or rebuild credit — if you pay on time. Every on-time payment is reported to the major credit bureaus and strengthens your payment history.
After 12 to 24 months of on-time payments, your score should improve significantly. At that point, consider refinancing to a lower rate. See our guide on when to refinance your car loan to understand when the numbers make sense.
For personal loans with bad credit as an alternative, see our Avant personal loan review — Avant specializes in near-prime and subprime borrowers.
How to Improve Your Credit Before Applying
If you can wait 60 to 90 days before buying, these steps can boost your score fast:
- Pay down credit card balances below 30% of the credit limit
- Dispute errors on your credit report
- Become an authorized user on someone else’s card with good history
- Avoid opening any new accounts until after you get the car loan
Even a 50-point improvement can move you from one credit tier to the next. That could cut your interest rate by 3 to 5 percentage points. On a $20,000 loan over 60 months, that saves $1,500 to $2,500.
Full guide: how to improve your credit score.
Frequently Asked Questions
What credit score do I need to get a car loan?
There is no hard minimum. Some lenders work with scores as low as 500. But below 580, rates will be very high and terms will be limited. A co-signer with good credit can help.
How much down payment do I need for a bad credit car loan?
Most lenders want at least 10% down if your credit is poor. A larger down payment reduces the lender’s risk and can improve your chances of approval and a better rate.
Can I get a car loan from a dealership with bad credit?
Yes. Many dealers work with subprime lenders. But dealer financing for bad credit often carries higher rates. Compare dealer offers against offers from banks and credit unions.
Will getting a car loan help my credit score?
Yes, if you pay on time. Auto loans are installment accounts. On-time payments build your payment history, which is the biggest factor in your credit score.
Should I wait to improve my credit before getting a car loan?
If you can wait 3 to 6 months, improving your credit score even 50 to 100 points can save you thousands over the life of the loan. But if you need a car now, focus on a manageable payment and refinance later.