When you have bad credit and need a car loan, there are some challenges compared to getting a standard car loan. Keep your heads high, however, as there are a handful of great lenders out there who tailor their programs specifically for people with bad credit. We’ve researched the landscape of lenders who can help you get a car loan even if you have a below average credit score.
Based on our study, OneMain Financial and LightStream are two of the top lenders offering bad credit card loans. This is due to factors such as loan options, skill requirements and interest rates offered. Of course, we offer in-depth reviews of all of the top lenders who offer bad credit auto loans later in this article.
Apply now with our top selection: OneMain Financial
In this guide, we will also help you understand the factors that play a role in choosing the right car lender and how to get the best possible rate.
Main factors for auto loans with bad credit
When you are in the market for a car loan with bad credit you need to consider and compare a wide variety of factors. Here are the key loan details that we examined in our study and the ones that you should prioritize when choosing the best auto loan for your needs.
- Check your credit score. And understand what your credit report says.
- FICO values below 579 are considered “bad”. However, you may need bad credit with a score up to 669.
- Interest rates and fees are important. This can make a huge difference in how much you pay for a car loan each month.
- Compare the loan terms. Take into account your repayment schedule and compare lenders with that in mind.
- Getting prequalified online can help. Some lenders, including those who created our rankings, allow you to qualify for a loan online without a hard query on your credit report.
- Watch out for credit restrictions. Some lenders put restrictions on the car you can buy. Remember to avoid unpleasant surprises later.
The Best Auto Loans With Bad Credit 2020
The best auto loans with bad credit make it easier for consumers to qualify for the finance they need. The following lenders made our list because of their superior loan offers, excellent customer service, and reputation in the industry.
Why Some Lenders Failed to Make the Cut
While the lenders we profile are the best of the best, there are plenty of auto loans with bad credit that haven’t quite made the cut. We did not include any lenders who only offer refinancing car loans, for example, as we know that many people need a car loan to buy a new or used car or truck. We’ve also stayed away from bad credit auto loans, which charge outrageous fees for consumers with the lowest credit scores.
Bad Credit Auto Loan Reviews
We’ve listed the top companies we selected in our study above, but we’d also like to provide readers with more insights and details on each company. The reviews below highlight the highlights of each lender who made our list, as well as our assessment of who they are best suited for.
OneMain Financial: Best flexibility
OneMain Financial offers personal and auto loans with interest rates between 18.00% and 35.99%. You can repay your car loan in 24, 36, 48 or 60 months and borrow up to $ 20,000 on a new or used car with this lender. You can apply for your car loan online and from the comfort of your home. Approval is possible within a few minutes.
While OneMain Financial doesn’t list minimum creditworthiness requirements, it does assume they’ll approve consumers with a score of just 600. You should also note that OneMain Financial auto loans come with an origination fee of up to 5% of your loan amount.
Why This Lender Made Our List: OneMain Financial offers a lot of flexibility with your loan terms, including the option to repay your car loan over a five year period. OneMain Financial also has pretty decent user ratings for a bad lender and they have an A + rating with the Better Business Bureau.
Possible cons to be aware of: OneMain Financial charges some pretty high interest rates on its bad credit loans. Don’t forget that you may have to pay an origination fee, which is up to 5% of your loan amount. Their loans are also capped at $ 20,000, which means this lender won’t work for everyone.
For whom it is best: This lender is best for consumers with really bad credit who need auto finance but cannot get approval for better credit.
Upgrade: Best Personal Loan Option
Upgrade is an online lender that offers personal loans with fixed interest rates, fixed monthly payments, and a fixed repayment period. You can borrow up to $ 50,000 in an unsecured loan, which means that you will not use the car you have purchased as collateral for the loan.
You can repay the borrowed money within 36 to 60 months, which allows you to optimize your loan offering to get a monthly payment that you can afford. The upgrade requires a minimum score of 620 to qualify. However, it takes into account additional factors such as your income and employment history.
Why This Lender Made Our List: The upgrade allows you to check your plan online without checking your credit report. This makes it easy to shop around and compare this loan offer to others without having to fill out a full loan application. Also note that the BBB upgrade has an A + rating.
Possible cons to be aware of: Upgrade fees, APRs of up to 35.89% for worst-credit consumers, and an origination fee of up to 6% of your loan amount may also apply.
For whom it is best: An upgrade is best for consumers with decent credit who need to borrow a larger amount of credit. This loan is also best suited for anyone who wants a car loan that is not secured by their vehicle.
AutoCreditExpress.com: best loan for bad credit and no credit
AutoCreditExpress.com is an online platform that helps consumers with bad credit and even no credit get the finance they need. Once you have completed some basic credit information, you will be connected to a lender who can offer you the financing, as well as a dealer in your area. From there, go to the local dealer and pull together the pieces of your car loan, including the purchase price of the car you want.
Why This Lender Made Our List: AutoCreditExpress.com has an A + rating from the Better Business Bureau. This platform also enables consumers without credit to finance a car. This is a welcome relief for first-time credit building users.
Possible cons to be aware of: This website is a lending platform but does not provide loans to consumers directly. This means you have no idea about rates and terms until you fill out an application and connect with a lender.
For whom it is best: This loan is best suited for consumers with no credit or minimal credit rating who cannot otherwise be approved for a loan.
MyAutoLoan.com: Best credit comparison site
MyAutoLoan.com is a credit comparison site that allows you to compare up to four car loan offers in minutes. You can use this website to apply for a new car loan, but you can also use it to check refinance offers on a car loan that you already have. You can also use funds from this platform to buy a car from a dealer or private seller.
Why This Lender Made Our List: Comparing car loans in terms of their terms, interest rates, and fees is the best way to save money and get the best deal. Since MyAutoLoan.com is a credit comparison site, it’s easy to shop around and compare competing offers.
Possible cons to be aware of: Credit comparison sites connect you with other lenders who have their own loan terms and minimum requirements for approval. Make sure that you know and understand all the details of the loans that you are considering before you sign on the dotted line.
For whom it is best: MyAutoLoan.com is best for consumers who want to do all of their car loan purchases from a single website.
Capital One: Best Big Bank Loan For Bad Credit
Capital One offers online car loan financing in conjunction with a program called Auto Navigator®. This program allows you to pre-qualify for a car loan online and then work with a participating dealer to coordinate a loan for the car you want. Capital One also allows you to check for available vehicles at participating dealers before applying for funding. This makes it easy for you to find out how much you might need to borrow in advance.
Why This Lender Made Our List: Capital One has the huge advantage of being able to pre-qualify online without carefully checking your credit report. Capital One is also a reputable bank with a long history that should provide some convenience to borrowers. They have an A + rating from the BBB and lots of decent reviews from consumers.
Possible cons to be aware of: You should be aware that Capital One car loans only work with participating dealers, so you may have a limited range of cars available.
For whom it is best: Capital One car loans are best for consumers who are looking to find a car to buy from one of the participating lenders who work with this program.
LightStream: Best for quick funding
LightStream offers online loans for a variety of purposes, including car finance. Their auto loans for consumers with excellent credit start at just 3.99% on Autopay, and even their loans for consumers with lower credit scores are only 16.79% on Autopay.
You can apply for your LightStream loan online and get approval within minutes. This lender can also send your money once you submit an application on the same business day.
A minimum credit value of 660 is required for loan approval, although other factors such as your work experience and income are taken into account.
Why This Lender Made Our List: LightStream offers auto loans on exceptional terms, and that goes even for consumers with less than perfect credit. You can also fund your loan on the same working day that you apply for it. This is vital if you need car finance so you can get back on the road.
Possible cons to be aware of: With a minimum credit score of 660, these loans will not work for consumers with the lowest credit score.
For whom it is best: LightStream is best for those with decent credit who need auto loan finance as soon as possible.
What You Need To Know When Applying For A Car Loan With Bad Credit
Interest rates and fees are important.
If you think your interest rate and loan fees don’t make a huge difference to your monthly payment, think again. The reality is that prices and fees can make a huge difference in how much you pay for a car loan each month. Consider the following: A $ 10,000 loan with 35.89% annual interest costs $ 361 per month for five years. The same 21.99% APR loan amount will bring you back just $ 276 per month. At 9.99%, you’d pay just $ 212 per month for five years. Bottom Line: Compare auto loans to bad loans so you can get the lowest possible APR that you can qualify for.
Take steps to improve your credit score before you apply.
It is not always possible to wait to apply for a car loan, but you can potentially get a lower interest rate and better loan terms if you can improve your credit rating before borrowing money. The most important steps you can take to improve your score are paying all bills early or on time, as well as paying off debts to reduce loan use. You should also avoid opening or closing too many credit card accounts to avoid new inquiries on your credit report and to maintain the longest average length of your credit history.
Compare the loan terms.
Some lenders allow you to borrow money for up to 84 months, while others allow you to repay your loan for a maximum of 36 or 60 months. If you need to repay your loan over an extended period of time to ensure an affordable monthly payment, you need to compare lenders based on this factor. If you’re having trouble figuring out how much you can afford, it can also be helpful to measure affordability by the monthly payments you can handle.
Getting pre-qualified online can help.
Some lenders, including those who created our rankings, allow you to qualify for a loan online without a hard query on your credit report. This makes it a lot easier to compare prices and shop around without officially applying for a car loan. Also, if you qualify for more than one lender, you can determine which lender offers the lowest interest rate without filling out a full loan application.
Watch out for credit restrictions.
When comparing the lenders on this list, keep in mind that not all lenders will give out loans for every car you want. Some only allow you to finance cars with participating lenders on their network, which can drastically limit your options and make it impossible to purchase a car from a private seller. If you are hoping to buy a car from someone you know or from a website like craigslist.org, you should check with your personal bank or credit union that you have a relationship with.
Auto loans with bad credit don’t have to be forever.
Finally, you should know that bad credit auto loan doesn’t have to last forever. You may need to borrow money for a car now, regardless of the interest rate and terms for which you may qualify. However, you may be able to refinance your loan into a better loan product later. This is especially true when your focus is on improving your credit score right away and when you are using your car loan as an opportunity to prove your creditworthiness.
How to get the best price
1. Check your credit score.
Your creditworthiness is one of the most important determinants of the cost of borrowing. Before you apply for a car loan, your credit rating can help you determine where you stand. Your score might not be as bad as you think, but it could also be worse than you ever imagined. Either way, it is helpful to know this important information before you start buying a car loan.
2. Build up your credit over time.
If your credit score is working, you should take immediate steps to improve it. The most important steps you can take to improve your credit score are paying all bills early or on time and paying off debts to reduce your credit load. Also, make sure you don’t open or close too many credit accounts in a short period of time.
3. Check your credit reports.
Use AnnualCreditReport.com to get a free copy of your credit reports from all three credit reporting agencies. Once you have this information, check your credit reports for errors. If you find incorrect information that could affect your score, follow the steps to remove the incorrect information.
4. Compare loan offers from at least three lenders.
A crucial step in getting the best rate is shopping for and comparing loan offers from at least three different lenders. This is important because lenders with different criteria may offer a lower APR or better terms than others.
5. Be flexible with repayment terms.
Also, consider a few different loan terms, provided everyone can afford the monthly payment. Some auto lenders offer better interest rates for shorter terms. This can help you save money if you can afford to pay back your loan over 24 or 36 months instead of 60 months.
How we picked the best auto loans
The lenders on our list weren’t torn out of nowhere. In fact, the team behind this guide spent hours comparing car lenders based on a variety of criteria. Here’s everything we considered when comparing the best auto loans with bad credit 2020:
Interest rates and loan terms: Our team looked for loans that would offer consumers with bad credit reasonable interest rates and terms. While higher APRs are typically billed to consumers with a low credit score, we’ve only considered lenders who offer reasonable interest rates that don’t seem unreasonable for the auto loan market.
Ratings and reviews: We preferred lenders who have decent reviews online, either through Consumer Affairs, Trustpilot, or another third party website. We’ve also given better grades to lenders that have a positive rating with the Better Business Bureau (BBB).
Online availability: Lenders who offer full credit details online were definitely given top priority in our ranking, and lenders who allow you to qualify online without a hard query in your credit report received the most points in this category. However, since not everyone wants to apply for a loan online, we have also included some lenders with whom you can apply for a loan over the phone.
Admission requirements: Finally, we looked for lenders who primarily lend to consumers with low credit scores. Not all lenders offer specific information on approval requirements, but we have done our best to find lenders who will only accept borrowers with good or excellent credit.
Summary: Best Bad Credit Card Loans of 2020