Best Auto Loans for Bad Credit in 2026

Auto loans for bad credit can help borrowers with poor credit scores finance a new or used vehicle. Here’s what to know about qualifying, comparing lenders, and managing the cost of financing with bad credit.

Reduce the hassle with a little expert insight into how borrowers with bad credit can still qualify for auto financing. 

1. Can I Get an Auto Loan With Bad Credit?

Yes. Many lenders are willing to extend auto loan offers to borrowers who have bad credit scores. 

This is partly because, unlike most personal loans, an auto loan is secured. This means that the vehicle you purchase is also used as collateral to secure your loan. If you stop making payments or default on the loan altogether, the lender can repossess the vehicle and sell it to recoup some of its losses.

Because lenders can offset some risk, they may be more willing to consider applications from borrowers with credit issues.

It’s important to remember that not all bad credit is the same. Your FICO credit score can range from 300 to 850. A score under 580 is generally seen as poor credit (that’s what FICO refers to as bad credit). Let’s take a closer look at FICO’s credit score tiers:

Lenders who specialize in auto loans for bad credit borrowers, often called subprime auto lenders, may consider your application if you have a credit score in the 500s. At 500 or below, your options may dwindle.

2. Can I Get Approved for a Car Loan With a 500 Credit Score? 

If your credit score is 500 or lower, finding a lender willing to work with you can be challenging. And even if you get approved for financing, expect the interest rates to be quite high. The good news is, you can improve your chances and potentially get better rates and terms by:

• Adding a trade-in vehicle: The inclusion of a trade-in can lower the loan amount and increase your stake in the purchase. That means you’ll have to borrow less and have more invested in the loan.
• Making a down payment: Auto lenders don’t like to be the only ones taking on risk. When you include a down payment, you show that you have skin in the game and are serious about handling your debt.
• Enlisting the help of a cosigner: A cosigner is someone who is willing to sign for your loan to guarantee that you will repay the debt, typically someone with much better credit. Just be sure to stay on top of your loan payments because a late payment or default will hurt your and the cosigner’s credit scores, which could also fracture friendships and family ties. 

You may also find yourself struggling to find a loan if you have no credit history, which means you haven’t had enough information reported to the credit bureaus to generate a credit rating or score. You may not have financial mistakes on your credit reports, but you don’t have a past that a lender can view.

3. Which Banks Offer Auto Loans For Bad Credit?

Many traditional banks have stricter underwriting standards for borrowers with bad credit.

A credit union, on the other hand, is a member-owned institution that returns all of its profits back to its members. While this means more affordable financial products and more lenient loan approvals, it doesn’t mean someone who has bad credit is guaranteed a loan.

Here are some of the primary differences between banks and credit unions:

Most credit unions limit their loans to members who have fair credit or better. That means a FICO score of 580 or higher. But that doesn’t mean you’re out of luck — many independent lenders consider financing applicants who have bad credit.

4. What Interest Rate Will I Pay for a Bad Credit Auto Loan?

Bad credit borrowers will pay the highest interest rates for auto loans, but the actual rate depends on market conditions and other economic factors.

Your credit score plays a significant role when auto lenders set out to determine your interest rate because it clearly highlights your risk as a borrower. Finance options for poor-credit consumers can climb to higher than 21% for used car loans.

That’s nearly four times greater than the lowest average interest rates offered to borrowers purchasing new cars with excellent (or superprime) credit. Here is a look at the average auto loan interest rates by credit score:

Shopping around with lenders that offer prequalification can help you compare estimated rates without submitting multiple full applications right away.

Over the course of an auto loan, these interest rates can mean paying thousands of extra dollars because you have bad credit. How much you ultimately pay also depends on your loan term, or the length of the loan.

Because bad credit borrowers pay such high interest rates, many choose longer loan terms to keep their monthly payments affordable. But this also costs much more money in the long run — as we will discuss later.

5. Can I Buy a New Car With Bad Credit?

You may still qualify for a loan to purchase a new car if you have bad credit, but it could hinge on other factors, including down payment, trade-in value, your income, and whether you have a cosigner.

Car and Driver reports that the minimum credit score needed to secure a new car loan is likely around 600. Most borrowers who secure new car loans have a score of around 730.

If you have a very low credit score, such as below 500, you will have trouble finding a loan without a large down payment or a cosigner. A score above 550 could give you a better chance of qualifying for a new car loan, but new car loans for bad credit borrowers have plenty of hurdles.

In either scenario, you will still likely need to include a substantial down payment or a trade-in to lower your overall loan amount. Few lenders, if any, will lend 100% of a new vehicle’s price to someone who has bad credit.

Even with bad credit, you may still have options for financing a vehicle. Comparing lenders, making a down payment, and borrowing only what you can afford can help you secure a loan that fits your budget and supports your long-term financial health.