An auto loan can help you get the money you need to buy a car. But without a credit score of at least 580 (out of a possible 850), you’ll find it difficult to get an auto loan from a traditional lender. At that point, you have two choices. You could get a loan from a lender that specializes in bad-credit auto loans, or you could apply for a personal loan on iPaydayLoans to finance your car purchase.
How Can Bad Credit Car Loan Help Me?
Bad-credit car loans, also known as second-chance or subprime car loans, are the same as regular auto loans in all but one detail: borrowers pay higher interest rates than they would on a standard auto loan. They may also have to accept a shorter term, paying off a loan in three years, for instance, instead of five.
In exchange for those higher payments, a borrower gets a bit more than the price of a car. A bad-credit auto loan is also an opportunity to improve your credit score by making each payment in full and on time.
Bad-credit auto loans also have high acceptance rates and quick approvals or denials. Lenders do look at your credit score, but also consider your income, payment history, length of employment, loan amount, and total debt.
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Get StartedWhere Can I Get an Auto Loan With Bad Credit?
Banks and credit unions are good places to start. You’re more likely to get a loan if you already do your banking at the place you apply. Credit unions may only lend to their members and typically offer lower interest rates than banks.
Some car dealerships provide financing for car purchasers, either with partner banks or credit unions or through in-house financing that would require you to make payments to the auto dealer. Online car retailers may also offer subprime auto financing.
Online loan marketplaces such as iPaydayLoans, PersonalLoans, and BadCreditLoans can connect you with lenders within their networks that can provide you with a comparatively low-cost personal loan. You can then use these funds to buy a vehicle.
 | Why Us | |
|---|---|---|
| How much can I borrow? | $50-$35,000 | No hidden fees or charges |
| I have bad credit. Can I apply? | Yes | Bad credit is considered |
| Over how long can I spread the repayments? | 1-36 months | Fast decisions |
| Are credit checks involved? | Yes | Soft credit checks only |
| Chances of getting approvals | Good | 256-bit encryption protocol |
| How to apply? | Apply online | Easy application |
Which Lender Should I Choose?
If your credit score isn’t great, you may imagine that you’ll have to take whatever loan you can get. In fact, you’ll probably have a choice of lenders. As you make your pick, consider:
Rate discounts
Some lenders offer interest-rate discounts for borrowers who make payments on time. You can reduce the interest rate on your loan by up to 0.5% every quarter, a potentially valuable savings over the life of your loan.
Co-signers
Some lenders let you apply for a loan with a co-signer, a borrower who says that he or she will be responsible for making your payments if you default. A co-signer can help increase your chances of approval and also get you a lower interest rate.
Range of loan options
You can’t control a lender’s decisions, but you can improve your odds of getting a loan.
The larger the range of loan options a lender offers, the better. Lenders may offer new and used-car loans independently or through a dealership. Others will help you refinance the auto loan you already have. The more options you have, the more likely you are to find a good deal.
How Can I Improve My Odds of Getting Approved for Bad Credit Car Loans?
Look up your score
You’re entitled to a free credit report every year from each major credit-reporting agency: Equifax, Experian, and TransUnion. Read the report. Is it accurate? If not, ask the agency to fix the problem. If nothing else, you have the right to include a letter of explanation in your credit file, which goes to any potential lender as soon as you apply for a loan.
Settling repayments and everything loans are reported by your lender to the credit bureau and the latter have no way of verifying. Look carefully, and you may just find some error lurking somewhere.
Find a cosigner
A co-signer increases your credibility and makes you a less risky, more attractive customer. This person should be someone you trust who also has good credit. Remember that a co-signer promises to repay the loan if you default, so make sure you are able to pay this debt. Your relationship will suffer if you don’t.
Use a personal loan
You may find it easier to get a personal loan than an auto loan. That’s fine. Just use the loan amount to buy a vehicle. You will own this car outright, so it can’t be repossessed if you default on your loan. It will also count as an asset on your balance sheet, which can help you get a future car loan.
Auto Loan Rates and Loan Terms Explained
Understand common lending terms before you begin shopping for an auto loan.
APR is an acronym for "annual percentage rate." It tells you how much interest the lender will charge on your loan balance every year. APR helps determine the size of your monthly payments and how much you’ll pay in total during the life of your loan. An APR can be fixed, meaning that it stays the same for as long as you have the loan, or floating, meaning that the rate can change according to a preset formula.
The interest rates available to you depend on market conditions, your credit history, and current interest rates in the country and the world.
Loan term is the amount of time it will take to pay off your loan, provided you make monthly payments on schedule. Longer terms mean smaller monthly payments; shorter terms mean higher monthly payments. For the same APR, you will pay more in total over a longer loan term than over a shorter term.
FAQs:
Can I get bad-credit car loans if I my credit score is below 500?
Yes, you can — but you should expect to spend time finding one and pay a higher interest rate than you would with a stronger credit score. Try attracting a lower interest rate by choosing a shorter loan term, finding a co-signer, or making a bigger down payment on your vehicle purchase. iPaydayLoans has a network of lenders to help you.
What will I need to apply for auto loans for bad credit?
Plan to supply your full name, address, phone number, email, income, and Social Security number. Lenders will expect to see a tax return or pay stubs to prove your income.
How should I compare the loan offers?
Your ideal loan comes from an established lender and offers the lowest possible interest rate, a convenient payment method, and realistic loan conditions. It also reports early payments to the major credit bureaus, which can help improve your credit score.
Will I pay more for an auto loan if I have bad credit?
Yes, you may. Borrowers with subprime credit scores are considered riskier than borrowers with higher scores. Lenders compensate themselves for taking this risk by charging higher interest rates and (sometimes) more fees.
Will a bad credit auto loan impact my credit score?
Yes, it can affect your credit score in positive and negative ways. Paying on time or early can improve your score. Miss a payment and your score will take a hit. Multiple credit report inquiries as you apply for loans can also lower your credit score, so it’s smart to research lenders and apply to just a few.
What happens if I can't keep up with my repayments?
If you stop making payments on your subprime auto loan, the lender may repossess your vehicle. Your credit score will go down. The lender may also charge you default fees or raise the interest rate on your loan. If you can’t make a payment, it’s wise to let your lender know ahead of time.