Best Lenders & Rates (April 2023)

Key Takeaways

• AutoPay, myAutoloan and Ally are our top picks for auto loans for those with bad credit.
• A bad credit score means you could face higher interest rates and won’t qualify for all types of loans.
• If you get denied for a car loan due to bad credit, there are simple steps you can take to increase your chances of getting approved.

When you have bad credit, finding a car loan to purchase a vehicle can be stressful. Bad credit car loans typically come with higher interest rates and may require large down payments. However, there are options available when it comes to auto loan providers that specialize in bad credit car loans.

In this article, we at the Guides Auto Team will explain the loan application process and provide you with tips to help increase your chances of getting approved. Based on our research, we’ll also recommend several auto lenders that offer services to people with poor credit including some that offer the best auto loan rates of 2023.

We’ve compiled a list of 9 auto loan provider recommendations to help you get started with your search. The company that’s best for you will depend on your circumstances. We recommend reaching out to multiple lenders to shop around for the best loan terms or best auto refinance rates.

We’ve provided information below on three of the best bad credit car loan providers.

myAutoloan

Starting annual percentage rate (APR): 5.64% for new cars, 5.89% for used cars
Loan amounts: $8,000 minimum
Loan terms: 12 to 84 months
Availability: 48 states (not available in Alaska or Hawaii)
Minimum credit score: 575

The myAutoloan marketplace allows you to compare when you shop for new and used auto loans, refinance auto loans and lease buyout loans. Since myAutoloan functions as a marketplace for lenders and has a minimum credit score requirement of 575, it offers more opportunities for loan approval.

Read more: myAutoloan review

AutoPay

Starting APR: 2.99%
Loan amounts: $2,500 to $100,000
Loan terms: 24 to 96 months
Availability: 50 states
Minimum credit score: 575

AutoPay is an auto refinance and lease buyout specialist. Rates start at 2.99% APR for refinancing, though only borrowers with high credit scores will qualify for the best auto loan rates. People with bad credit who want to refinance their vehicle loans may get approved by AutoPay, as the company has a minimum credit score requirement of 575.

Read more: AutoPay review

Ally

Starting APR: 4.74%
Loan amounts: $1,000 to $300,000
Loan terms: 36 to 75 months
Availability: 48 states (not available in Nevada, Vermont or Washington, D.C.)
Minimum credit score: 580

Ally is one of the largest car finance companies in the U.S. The lender offers loans on new or used vehicles, auto loan refinancing and lease buyout services. According to our research, APRs for refinancing start as low as 4.74% and loan terms of up to 75 months are available. Ally has a minimum credit score requirement of 580, making it easier for those with less-than-excellent credit to get approved.

When a person has bad credit, a lender may assume an inability to pay bills on time and an increased likelihood of failing to make future payments. Bad credit is typically reflected in a FICO score of 579 or lower.

If your credit score falls below this threshold, you may not be eligible for all loans and could face higher interest rates. The tables below show average auto loan interest rates by credit score for new and used cars, according to Experian’s State of the Automotive Finance Market Q2 2022 report.

Buyers with credit scores under 660 receive higher interest rates. Note that interest rates are also higher for used cars than for new cars. If your budget is tight and you can only afford a used vehicle, you will pay less overall but will have a higher interest rate.

Your credit score is determined by a variety of factors, including your payment history and the length of your credit history. In the graphic below, you will find a breakdown of how each factor impacts your credit score.

Even if you have a low credit score, you have several auto financing options to choose from — you just need to find the right lender for your situation.

There are four types of lenders you can reach out to:

• Online lenders: Online lenders are convenient because you can find out whether you have been approved for a new loan within minutes. These lenders may also provide you with a lower interest rate since they have lower overhead costs. Online lenders are also more likely to offer car loan preapproval so you can get an idea of your loan payment and interest rate before you make a purchase. Remember that preapproval requires a hard credit check, unlike the less-involved prequalification process.
• Banks: Many national and local banks offer car loans. However, some banks may only allow you to get a loan through dealer-arranged financing.
• Credit unions: Most credit unions offer car loans with low interest rates. You may be able to apply for a car loan directly or through a dealership. The only downside is that you may have to be a member of the credit union to qualify for its offerings.
• Car dealerships: Many dealerships offer their own financing options for car buyers. And if they don’t, others will shop around for you through dealer-arranged financing.

Bad Credit Car Loan Information

To apply for a car loan, you’ll need to have certain information handy, including:

• Your name, address and phone number
• Your Social Security number
• Your credit score
• Gross annual income information
• The model, age and mileage of the vehicle you wish to purchase or refinance

Some financial institutions may also ask for additional information before a loan is approved, such as:

• Pay stubs
• Driver’s license
• Personal references

When you apply for a car loan or refinancing, you may not be approved the first time. This could be because of your bad credit situation or a lack of established payment history. Here are some tips that can help increase your chances of getting approved by an auto loan lender:

Our Auto Loan Survey

In late 2022, our team surveyed 2,000 people who had auto loans. Just under 30% of respondents had a co-signer for their loans. The most common loan term among respondents was 60 months, while the most common amount financed was $20,000.

When it comes to why respondents selected their lenders, two reasons were ranked most important by 29% of those surveyed: a good APR and variety of loan options. Reading customer reviews online was the most impactful touchpoint for selecting an auto loan company.

If you have poor credit, you still have options for auto loans. You can get bad credit car loans from a number of banks, credit unions, car dealers and online lenders. Typically, you’ll pay a higher interest rate, but you don’t have to settle for the first offer you come across. We recommend that you shop around and compare options to find the best auto loan for you.

Below are some frequently asked questions about bad credit auto loans.

Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best auto loan companies. We collected data on dozens of loan providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the companies that scored the most points topping the list.

Here are the factors our ratings take into account:

• Reputation (30% of total score): Our research team considered ratings from industry experts and each lender’s years in business when giving this score.
• Availability (20% of total score): Companies that cover a variety of circumstances are more likely to meet borrowers’ needs.
• Loan Details (15% of total score): We considered the types of loans, term lengths and loan amounts that are available from each lender to determine this score.
• Rates (25% of total score): Auto loan providers with low APRs scored highest in this category. Available discounts were also taken into account.
• Customer Experience (10% of total score): This score is based on customer satisfaction ratings and transparency. We also considered the responsiveness and helpfulness of each lender’s customer service team.

In this article, we selected companies with low or no minimum credit score requirements and low minimum annual income requirements.

*Data accurate at time of publication.