Written by: Brittney Mayer
Edited by: Lillian Guevara-Castro
In 2017, nearly 107 million Americans held auto debt — a record-setting number. But with the average new car commanding a purchase price over $36,000, it’s little wonder few can afford to purchase a vehicle with one lump-sum payment.
And those seeking used cars fare little better, with the average used car boasting a $20,200 price tag. Considering the significant amount of money needed to obtain a new (or new-to-you) vehicle, most people must resort to taking out an auto loan to get on the road.
Unfortunately, as is the case in many other areas of consumer finance, auto lenders make loan decisions based on your personal creditworthiness. So, if you have a rocky credit history and low credit score, you may have a more difficult time finding a lender willing to offer you a loan. All is not lost, however, as you may still have some options — let’s take a look at how to get a car loan with bad credit.
In this article, we’ll explore several of our top picks for reputable lender networks, look at down payment options, and learn what it means to have a co-signers — and when you may need one.
Lender Networks | Down Payments | Co-Signers
Use a Lending Network to Compare Multiple Loan Offers
Unlike the days of yore, when every auto loan came from a car dealership or a bank, today’s auto lending industry is bursting with thousands of businesses looking to finance America’s car-buying needs. From the local neighborhood credit union to the social lending of peer-to-peer services, the modern shopper has more financing options than ever before.
With that in mind — and the old saying, “there’s plenty of fish in the sea” — it’s easy to see that the decision of one lender is rarely the end of the story. In fact, for most consumers, the right lender (and loan) are out there, if they but look in the right place. And one of the best ways to find the available offers from hundreds or thousands of lenders at once is through a digital lending network.
- Network of dealer partners has closed $1 billion in bad credit auto loans
- Specializes in bad credit, no credit, bankruptcy and repossession
- In business since 1999
- Easy, 30-second pre-qualification form
- Bad credit applicants must have $1500/month income to qualify
- See application, terms, and details.
| Interest Rate | In Business Since | Application Length | Reputation Score |
|---|---|---|---|
| 3.99% - 29.99% | 1999 | 3 minutes | 9.5/10 |
- Auto loan amounts of up to $150,000
- Prequalify in minutes without impacting your credit score
- Refinancing loans save an average of $191 per month
- 125% financing available for cash-out refis
- PenFed Credit Union membership required but can be applied for at the same time as your loan
- See application, terms, and details.
| Interest Rate | In Business Since | Application Length | Reputation Score |
|---|---|---|---|
| 5.19% and up | 1935 | 5 minutes | 9.5/10 |
3. RefiJet
- RefiJet helps people lower their monthly auto payment by an average of $150 a month*
- Pre-qualifying for a refinance auto loan does not impact your credit score
- Nationwide network of lenders
- We present you with options from lenders that fit your situation
- See application, terms, and details.
| Interest Rate | In Business Since | Application Length | Reputation Score |
|---|---|---|---|
| Varies | 2016 | 5 minutes | 9.0/10 |
Lending networks allow borrowers to compare interest rates, and other loan terms, to ensure they’re selecting the best possible offer, with the terms that suit their needs and budget. Rather than having to dash from bank to bank for quotes, borrowers using a lending network can often connect with lenders and dealers around the country through one easy online application.
When completing the application, borrowers will need to provide both their personal and financial information. This consists of basic data, such as name and address, as well as specifics on employment and annual income.
Additionally, when applying for an auto loan, most lenders will require you to already have a particular automobile in mind. You’ll need to provide details about your selected vehicle during the application process, including the vehicle’s year, make, model, and trim.
If you have yet to find the right vehicle but still want to determine your expected auto-shopping budget, many lenders will allow you to check for pre-qualified loan offers. Resulting in a soft credit inquiry, pre-qualification doesn’t impact your credit score and can be a good indication of your approval chances.
Make a Trade-In or Cash Down Payment for a Better Deal
Although your credit plays the primary role in your ability to get an auto loan (or any other type of loan), it isn’t the only factor taken into consideration by lenders. They’ll also be looking at your monthly income and current financial obligations to determine how large of a loan payment you can actually afford each month.
Based on what the lender believes you can afford each month, it will determine the maximum amount it is willing to lend you. Along those lines, if you are applying for a loan for a vehicle that would require a larger loan than you can comfortably repay (in the eyes of the lender), you will likely be denied that loan because the lender will consider the risk of default to be too high.
Consumers can get an idea of what their trade-in is worth by getting an estimate online.
If you are denied a loan because the purchase price of the vehicle you’ve selected is too high, you have three main options. The first option is to decrease the amount of financing you need by providing some form of down payment. This can be a cash down payment, or you can offer a trade-in vehicle.
Many dealers are happy to accept your previously owned vehicle as a trade-in, crediting you with some amount of the trade-in’s value on your new purchase. As you might suspect, the better condition your trade-in vehicle is in, the more value you should receive. To ensure you get a fair deal, research your vehicle’s current value before heading to the dealership.
Without a trade-in vehicle or other form of down payment, your next option is to make an attempt to negotiate with the dealer to reduce the purchase price of the vehicle. Given that most sellers will only have so much wiggle room in their bottom line, this method is least likely to be effective but could be worth a shot.
The last option is to simply select a different vehicle to purchase. This is likely the least appealing to many people, considering the research and legwork that typically goes into picking the perfect car, but it is an effective way to decrease the size of the loan that you need to obtain.
Obtain a Co-Signer to Improve Qualification Chances
Borrowers who have particularly rocky credit histories — or those with no credit history at all — may find it difficult to find a lender regardless of the size of your purchase price or down payment amount. If your credit risk is too high for lenders to feel comfortable offering you a loan, you may need to find a co-signer to help finance your purchase.
“A co-signer is a person who is obligated to pay back the loan just as you, the borrower, are obligated to pay. A co-signer could be your spouse, a parent, or a friend. The lender cannot require your spouse to be a co-signer unless you are both applying for the loan.” — ConsumerFinance.gov
Each lender will likely have its own specific requirements for a co-signer, but, in general, individuals must have good personal credit and clean credit history, without bankruptcies or other red flags, to co-sign a loan. In essence, the co-signer should be qualified to take on the loan by themselves, as the co-signer is using his or her own good credit to provide assurance to the lender that the loan will be repaid as agreed.
In addition to increasing your chance of being approved for a loan, applying with a co-signer may also allow you to qualify for a lower interest rate, as a co-signer reduces the risk to the lender. Even a small decrease can mean big savings. For example, when dealing with a $10,000 car loan, even a 2% decrease in your interest rate can mean saving hundreds in interest fees over the life of the loan, as shown in the table below.
Of course, while the primary borrower receives several benefits from their co-signer, co-signing a loan is not without its risks. Even if he or she never drives the vehicle, the co-signer is just as obligated to the lender as the primary borrower — and will suffer many of the same consequences.
What does this mean? Well, the co-signer will be considered responsible for repaying the loan should the primary borrower become unable to (or chooses not to) make the loan payments. Furthermore, the co-signer will also receive the same negative credit impacts as the primary borrower in the event of a late payment, missed payment, or default.
The Right Loan Can Get You on the Road
Although the modern automobile comes with more bells and whistles than ever before, sporting features like touch-screen dials and self-driving engines, those accoutrements don’t come cheap. And even though today’s vehicles come standard with improved safety features and other enhancements that were once upgrades — air conditioning, power windows, power locks — those standard features are built into the price as well. And with the price of even used cars averaging more than $20,000, the average American turns to an auto loan to finance a new (or new-to-them) vehicle.
For those car-buyers battling both high prices and low credit scores, however, it can seem like a daunting task to find the right loan. Thankfully, with a quality lending network, a healthy down payment, or a kind co-signer, almost anyone can qualify for an auto loan and get back on the road.
Advertiser Disclosure
BadCredit.org is a free online resource that offers valuable content and comparison services to users. To keep this resource 100% free for users, we receive advertising compensation from the financial products listed on this page. Along with key review factors, this compensation may impact how and where products appear on the page (including, for example, the order in which they appear). BadCredit.org does not include listings for all financial products.
Our Editorial Review Policy
Our site is committed to publishing independent, accurate content guided by strict editorial guidelines. Before articles and reviews are published on our site, they undergo a thorough review process performed by a team of independent editors and subject-matter experts to ensure the content’s accuracy, timeliness, and impartiality. Our editorial team is separate and independent of our site’s advertisers, and the opinions they express on our site are their own. To read more about our team members and their editorial backgrounds, please visit our site’s About page.
