There are many lenders that specialize in providing auto loans for people with bad credit. They often post their rates online and allow applicants to quickly compare offers without a hard pull on their credit.
In addition, some car dealership locations have their own finance teams and can provide a loan decision within minutes. However, it's best to shop around and get preapproved before arriving at the dealership.
Quick Approval
There are a number of lenders and online car-buying services that offer bad credit auto loans with fast approval. These include banks and credit unions, online lenders, and car dealerships with in-house financing. The process usually involves a soft inquiry, which does not impact your credit score. Many lenders also allow you to add a co-applicant, which can increase your chances of approval and make it easier to get the loan amount you need.
Other ways to improve your chances of getting a quick auto loan with bad credit include saving up enough money for a 20% down payment or finding a cosigner with good credit. A cosigner can help you qualify for a better interest rate and lower monthly payments, but it's important to make sure your cosigner will be willing to do this because a missed or late payment could damage both of your credit scores. Finally, some lenders allow you to prequalify with a soft inquiry without giving up your Social Security number.
No Down Payment
The good news is that you can find loans without a down payment for bad credit. Since auto lenders can repossess the car if you don’t make payments, they want to minimize their risk. This explains why you may see higher interest rates on these types of loans.
Some online lending networks connect you with local car dealers that provide in-house financing for people with bad credit. These dealers typically advertise themselves as buy here, pay here dealerships. These dealerships finance their own vehicles and offer bad credit financing directly to their customers. They often charge high interest rates and long loan terms to offset their increased risk of default.
You can also get a bad credit auto loan at traditional banks and finance companies that specialize in bad credit financing. They can prequalify you with a soft credit inquiry and allow you to add a cosigner to help increase your chances of approval. These companies also offer refinancing options like cash back and lease buyout refinancing to help you reduce your interest and monthly payments.
Low Interest Rates
The higher your credit scores, the better your chances of getting a lower car loan interest rate. Those with poor credit, however, may find high rates from lenders who view them as a greater risk.
These high interest rates can add up quickly and cost you thousands more than the vehicle’s value over the life of the loan. It’s important to research multiple lenders and shop around, including through aggregators or online marketplaces. They can help you compare offers without a hard inquiry on your credit score and weed out those that aren’t the best fit for your budget.
You can also save money by putting down as much of a down payment as possible, which will reduce your loan-to-value ratio and lower your interest rate. And remember to factor in other costs of car ownership such as fuel, maintenance and auto insurance when determining how much you can afford to spend on a new vehicle.
Flexible Payment Options
Many people with bad credit find it difficult to find a loan that will allow them to purchase a new car. However, there are several options that may help. These include banks, credit unions, online marketplaces, and car dealerships that offer their own financing (also called "buy here, pay here").
Most of these lenders feature a prequalification process that doesn't trigger a hard inquiry and can provide estimated loan terms. They also often make it easy to complete much of the financing process online, which is an especially useful feature for borrowers with bad credit. In addition to providing loans, these providers also offer resources for building credit and helpful tools such as a car loan calculator and estimator. Some of them also offer refinancing loans to reduce interest costs or shorten loan terms. Taking the time to save a down payment of 20% or more can help you save money on interest charges and may reduce your monthly loan payments.
