November 29, 2023

Car Auto Finance

Car Auto Finance FOR Everyone

Best Subprime Auto Lenders (2023)

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  • Expect to pay a steep interest rate if you’re in the market for a bad credit car loan.
  • Compare quotes from various auto lenders to find offers with reasonable interest rates.
  • The best lenders for bad credit car loans include myAutoLoan, Capital One, and Auto Credit Express.

Bad credit car loans come with extremely high interest rates but may be the only auto financing option for some drivers. Still, some lenders are far better than others.

To help you find the best auto loan rates and lenders, our team researched the country’s top providers to see how they serve those with low credit scores. In the following article, you’ll find details about the best bad credit auto financing providers along with a guide to finding the lowest loan rates for your credit score.

Here are some things to keep in mind as you search for bad credit car loans:

  • There’s no minimum credit score to get an auto loan.
  • Most lenders require a minimum income.
  • Ratings and reviews on sites like the Better Business Bureau (BBB) can help you to identify reputable lenders.
  • Find better rates by comparing your options and working to raise your credit score.

Best Providers for Bad Credit Auto Loans

Not all car lenders work with borrowers who have bad credit. Our team identified and evaluated providers that have a high likelihood of loan approval for those with poor credit scores. Below are a few lenders that offer strong rates and services to even risky borrowers.

Subprime Auto Lenders Minimum Credit
Score Required
Loan Amounts Minimum
Annual Income
myAutoloan 575 $8,000 to $99,000 $21,000
Capital One No minimum $4,000 to $75,000 $18,000
Auto Credit Express No minimum $5,000 to $45,000 $18,000
Clearlane 580 $10,000 to $80,000 $21,600
Carvana No minimum $1,000 to $85,000 $10,000
Vroom No minimum $5,000 to $100,000 $21,600
Credit Acceptance Corp. No minimum Determined by dealer Not specified

#1 myAutoloan: Best Loan Marketplace

Minimum credit score: 575
Minimum annual income: $21,000
BBB rating: A+

Rather than a direct lender or broker, myAutoloan is a car financing marketplace. This means that multiple lenders send competing offers after you submit your information to the site. The marketplace model makes it easy for car owners to compare various offers and potentially find more competitive rates.

myAutoloan Pros and Cons

myAutoloan Pros myAutoloan Cons
Website features useful tools like an interest rate estimator and payment calculator Has a minimum credit score requirement
High rating from customers on Trustpilot Not available in Alaska or Hawaii
Allows borrowers to compare multiple offers in one place

Keep reading: myAutoloan review

#2 Capital One Auto Finance: Best Bank for Bad Credit

Minimum credit score: None
Minimum annual income: $18,000 or $21,600 depending on credit score
BBB rating: A-

Many banks don’t offer auto financing to borrowers with bad credit, but Capital One is an exception. While the company doesn’t require a minimum credit score, it adjusts the minimum income requirement based on your credit. Capital One offers prequalification, allowing you to get estimates without damaging your credit rating. Borrowers can use Capital One’s Auto Navigator tool to find their new vehicle at one of the company’s over 12,000 participating car dealers.

Capital One Auto Finance Pros and Cons

Capital One Auto Loan Pros Capital One Auto Loan Cons
Soft pull prequalifications Must buy car from a participating dealership
No minimum credit score No lease buyout option
No prepayment penalty Many BBB complaints

Keep reading: Capital One auto finance review

#3 Auto Credit Express: Best for Bad Credit

Minimum credit score: None
Minimum annual income: $18,000
BBB rating: A+

Auto Credit Express is an online lending broker that specializes in car loans for people with bad credit. The company has helped millions of customers since its founding in 1999. There are no credit score requirements for securing a loan through Auto Credit Express, and loan amounts can range from $5,000 to $45,000. It’s also one of very few lenders that will work with borrowers during and after bankruptcy.

Auto Credit Express Pros and Cons

Auto Credit Express Pros Auto Credit Express Cons
Lots of helpful resources on its website Not a direct lender
Auto loan options for people who have filed for bankruptcy Mixed customer reviews
Low minimum income requirement Some lending partners are “buy-here-pay-here” dealers

Keep reading: Auto Credit Express review

How To Get a Car Loan With Bad Credit

The process for getting bad credit car loans isn’t much different than the one for those with good credit. Most steps are the same, though you’ll likely have fewer lending options and could face higher interest rates.

Below are the steps you’ll need to take to get a bad credit auto loan:

  1. Prepare your documents: You’ll need to provide a photo ID, proof of income, and other documents to complete the loan application process. Getting them together before you begin applying can help the process move forward smoothly.
  2. Find out your credit score: Knowing your credit score when you apply allows you to shop around for rates without pulling your credit. Many banks and credit card companies provide free credit score reporting. If yours doesn’t, you are entitled to one free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) per year.
  3. Get prequalified: Many lenders offer prequalification, which uses a soft pull of your credit to provide an estimated budget and interest rate. Prequalification doesn’t guarantee a loan, but it offers a realistic idea of how much car you can afford. Since this won’t affect your credit score, you can get prequalification from several lenders to compare potential rates.
  4. Find a car: With your budget in mind, start shopping for cars in your area. Some lenders have car-buying services that can narrow choices down to dealers and vehicles that meet lending requirements. Note the vehicle identification number (VIN) of whichever car you’re considering since it’s needed in order to secure a bad credit car loan.
  5. Apply for financing: Your auto lender will perform a hard credit check, also known as preapproval, when you’re ready to get a loan. This could temporarily hurt your credit score, but multiple hard pulls in a short period of time will only count as one check. In other words, you can apply for several loans without facing additional credit hits.
  6. Choose your loan: Compare offers to see which lender gives you the best rates and terms. As a bad credit borrower, you can expect rates to be high across the board. Still, you’ll find lower rates from some lenders than others.
  7. Sign your paperwork: Once you’ve decided on an offer, you’ll need to sign your loan agreement to complete the process. This obligates you to pay the loan as agreed upon. Your lender will hold the title to your vehicle until you’ve paid off the loan in full.

How To Get Approved for a Car Loan With Bad Credit

Getting approval for a bad credit car loan can be difficult. However, you can take the following steps to improve your chance of being approved:

  • Work with a bad credit lender: Certain auto loan providers specialize in borrowers with bad credit. These companies are much more likely to approve a loan if you have poor credit than many traditional lenders.
  • Increase your down payment: If you can afford to, putting cash down or using the value of a trade-in vehicle can lower your loan-to-value (LTV) ratio. This makes it considerably more likely that you’ll be approved.
  • Stay under budget: You don’t have to spend the full amount you’re preapproved for. Finding a car that’s well below your budget limit can help you get approved for a loan and leave you with financial breathing room.
  • Get multiple prequalifications: You can find varying interest rates and terms from different lenders, so it pays to get prequalified by many financial institutions. Avoid the hard credit checks of preapproval until you’re serious and ready to purchase a vehicle.
  • Find a guaranteed approval loan: Some car dealerships have in-house financing that uses your income and not your credit history to determine your creditworthiness. Be careful at these places, as many “buy-here-pay-here” dealerships have extremely high interest rates and hidden fees.

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What’s the Average Interest Rate for Bad Credit Car Loans?

The average annual percentage rates (APRs) for bad credit auto loans range from 10% to 14% for new cars and 17% to 21% for used vehicles. Average rates for bad credit car loans are quite high and are primarily influenced by your poor credit score.

Car Loan Rates With Bad Credit

Usually, those with bad credit face the highest car loan rates since they’re typically seen as risky borrowers. Below are the average rates for new and used car loans by credit score according to the Experian State of the Automotive Finance Market Q4 2022 report:

Credit Band Credit Score Average Rates for New Car Loans Average Rates for Used Car Loans
Superprime 781 to 850 4.75% 5.99%
Prime 661 to 780 5.82% 7.83%
Near prime 601 to 660 8.12% 12.08%
Subprime 501 to 600 10.79% 17.46%
Deep subprime 300 to 500 13.42% 20.62%

In the chart, you’ll note that there are five credit bands: superprime, prime, near prime, subprime, and deep subprime. Those with bad credit fall into the subprime and deep subprime credit categories. Moving from one tier to the next increases car loan APRs as rates jump significantly from near prime to subprime.

How Does a Bad Credit Score Affect Car Loans?

When you borrow money to buy a car, the lender basically purchases the car for you. Then, it charges you interest for using its money while you pay back the purchase price. To the lender, a low credit score means the borrower is less likely to make on-time payments. Auto lenders charge more in interest to offset this risk.

You’ll pay thousands more in interest if you’re applying for a bad credit car loan versus for a loan if you’ve got a superprime score. Improving your credit score by 100 points could save you over $1,000 in interest payments.

Keep in mind that your credit score isn’t the only thing that changes your loan payment. If you choose to get an extended car warranty at a dealership, that cost could be rolled into the price of your loan as well.

What Affects Your Credit Score?

Your FICO score is what most lenders use to assess your credit. This score is comprised of five factors that are weighted differently to reflect their importance. In the chart below, you can see how much each of these factors counts toward your overall credit score.

How To Improve Your Credit Score

Increasing your credit score takes time and financial discipline. As you can see from the differences in APRs, however, it’s more than worth it to improve your score. Here are a few things that will help to increase your credit rating over time:

  • Make sure that all bills are paid on time.
  • Avoid hard inquiries on your credit report unless absolutely necessary.
  • Focus on paying down your smallest debts first.
  • Consolidate debts into one monthly payment with lower interest.
  • Review your full credit report and look for any errors to resolve. You can get a free report from each credit bureau every year.
  • Don’t close credit cards or charge accounts after you pay them off.
  • Shoot for using 30% of your available credit or less. In addition to paying down your balances, try increasing your current credit limit to do this.
  • Open new lines of credit but don’t carry a balance on them. Instead, pay them off in full each billing cycle.
  • Open other types of credit lines to improve your credit mix. Add a personal loan or credit card to your portfolio if you don’t have one already.

Bad Credit Auto Loans: Conclusion

Bad credit car loans can be difficult to find and come with painful interest rates. However, some lenders offer better APRs than others to people with poor credit. By taking an organized approach and comparing several options, you can find better rates.

The good news is that paying off your bad credit auto loan will help to raise your score if you make all payments on time and in full. Combined with other healthy financial habits, you can improve your credit score and gain access to better rates. Once you do, you can refinance your auto loan to save additional money.

Car Loans For Bad Credit: Online Auto Lenders

Today, many companies offer online loan prequalification with just a few clicks. To find the right financing option for bad credit car loans, we recommend comparing multiple auto lenders and reading about the terms of each loan. Below are some highly rated bad credit car loan providers that are worth considering as you compare rates.

Bad Credit Auto Loans: FAQ

Below are the answers to some frequently asked questions about bad credit car loans:

Can I get guaranteed approval for bad credit car loans?

Yes, but be aware that these bad credit car loans are often at higher rates than from other subprime dealers. They are not completely guaranteed and instead often require a minimum income and a down payment.

Where can I get bad credit car loans?

A number of companies offer financing for people with bad credit including myAutoloan, Capital One, and Auto Credit Express. You may also find loan offers from your local bank or credit union, especially if someone with better credit co-signs.

Can I get a car loan with a 500 credit score?

While you can get a car loan with a credit score of 500, you’ll pay more overall. According to Experian’s State of the Automotive Finance Market Q4 2022 report, drivers with a score of 300 to 500 pay average rates of 13.42% for new cars and 20.62% for used cars.

Can I get a car loan with very poor credit?

Yes, you can get a car loan with very poor credit. You’ll pay more for interest in the long term, so it can be a good idea to choose a cheaper car or get a co-signer. In any case, multiple providers cater specifically to people with poor credit scores.

Where can I get car loans for bad credit?

You can get car loans for bad credit through many different subprime auto lenders, banks, credit unions, and dealerships. We recommend getting prequalified and comparing provider offers before making a commitment.

What happens if you miss a car payment?

Several things can happen when you miss a car payment. Your credit score will likely decrease and you may face penalties from your auto lender. You also risk repossession of your car if you fail to meet your obligations.

Our Methodology

Our expert review team takes satisfaction in providing accurate and unbiased information. We identified the following rating categories based on consumer survey data and conducted extensive research to formulate rankings of the best auto loan providers.

  • Industry Standing: Trust and reliability are two of the most important qualities in a lender. Our team considers current industry ratings from organizations such as the Better Business Bureau (BBB) along with factors such as a company’s age.
  • Availability: We examine how easy it is for borrowers to get a loan from each provider. Lenders that offer loans to meet a variety of customer needs receive high ratings.
  • Loan Details: Our researchers comb through the fine print to learn about the loan amounts, term lengths, and types of loans each provider offers.
  • Rates and Discounts: We take an in-depth look at the range of rates each provider offers for borrowers of different credit scores. Our team also factors in the discounts available with each lender.
  • Customer Service: Our team considers customer reviews and complaints when determining this score. We also consider the ease and availability of help online, over the phone, or in person.

*Data accurate at time of publication.