Most Important Factors for Bad Credit Car Loans
It’s hard to believe, but in many areas of the country, subprime lenders are the only businesses in your area which will be willing to grant you a car loan, even if you have bad credit or a poor credit score.
I recently had a client who faxed in a loan request. He was laid off and his truck was having transmission issues. He needed extra money to help buy a new transmission and some brake work.
His credit score was barely at 600. He had both a bankruptcy and an adverse public record on his credit report. And he lived in the state of Colorado, which is one of the most difficult states in which to get a car loan if you have bad credit.
What did he get back on his fax? A full loan approval. No questions asked about his credit. No verification of income. No credit report check. No verification of assets. No equity check. No verification of employment. A full loan approval … simply based upon him stating that he needed the car.
This is the kind of transaction we have grown accustomed to seeing in the deep subprime market. The fact that subprime lenders have been willing to grant loans that no bank would have ever extended to these borrowers has made their subprime auto loan businesses exceptionally profitable. As a result, many of these subprime lenders have grown to become billion dollar companies.
The Best Bad Credit Car Loans of 2022
If you have bad credit, the task of getting a car loan seems impossible. Or it’s at the very least a long, drawn-out affair with a lot of stress and anxiety about getting turned down.
But once you know where to look, getting a bad credit car loan can happen in a matter of days. Some even happen within hours.
The first thing to know is that the deal is the same in every state – it’s just the terminology that fulfills state requirements that differs. You will hear the following terms: unsecured loan, bad credit loan, subprime loan, guaranteed loan, and a host of others. What it really all boils down to is the same thing – you are borrowing money from a lender to buy a car.
Why Some Lenders Didn’t Make the Cut
Although the number of lenders willing to loan to people with credit scores below 600 has skyrocketed, so has the number of complaints from borrowers.
Complaints are magnified because they are more likely to happen when the borrower considers the lender difficult to deal with.
A lender ranks high on our list because of how easy it the lender was to work with, not based on the rates it offered.
Some lenders rate as high as others and promise to accept a lower credit score but really mean it but the underwriting process ends up being more difficult than they advertise.
Similar to the borrowers who complain about when the process was difficult to deal with, it is important to us to be transparent.
The list below contains the best car loan options for bad credit across a range of credit scores (and professions that may affect credit scores).
While these loans are not our personal favorites, they may be the best options for you.
You may not like the rates listed but that doesn’t mean you shouldn’t take a look.
Some of these lenders are among the more difficult to work with while others are fairly easy to deal with.
If they don’t deliver on expectations, we will remove them from the list.
Bad Credit Auto Loan Reviews
Financing a car with bad credit is easier and more likely to be approved than ever before. Car loan companies now have different types of car loans that cater specifically to those with bad credit.
You can get a used car loan with bad credit or a new car loan with bad credit. Car dealerships may be willing to lend you a car or help you get approved for a loan if you financed that car from them. Typically, a car dealer will lend you up to 80% of the retail value of the car you are buying in a new car loan, but they may lend you up to 85% or 90% if you are buying a used car.
You can apply online for financing with bad credit on your own or go through your local car dealership. You may also have a friend or family member that can help you with an auto loan despite your bad credit history.
If you do decide to apply online for a loan with bad credit, do your research to find the best loan provider for your situation. The best way to do this is to read customer reviews. The more reviews you read, the better picture you’ll have of the company you’re dealing with.
OneMain Financial: Best for Flexibility
Upgrade: Best Personal Loan Option
If you’re looking for a car loan but have bad credit, you’re probably going to find just about every lender to tell you that you don’t meet their minimum requirements. If you were able to find a lender willing to give you a loan, the interest rate and fees would probably be through the roof.
However, there’s no need for you to worry if you have bad credit, because there are options out there that can put you in the driver’s seat of the car of your dreams. Here are the top three options for you.
Direct Lender Loans
A direct lender loan is the best place to start when you want to get a car loan with bad credit. Although every lender will run a credit check, which will earn you a ding on your credit, direct lenders are more willing than their indirect counterparts to overlook your bad credit and place you in a loan that’s right for you.
Like any other kind of loan, direct lender loans carry interest rates that can be very high depending on the lender. However, since you can go straight to the lender instead of going through a bank, you’ll have the option to read the terms of the loan and add in a few provisions with the lender to make the deal more palatable.
AutoCreditExpress.com: Best Loan for Bad Credit and No Credit
Let’s face it, it isn’t easy walking into a dealership and negotiating a new car loan when your credit is bad. Many dealers won’t even talk to you because the bottom line on a car loan is simple; they need to be sure they can get their money back.
Even if you do manage to get a dealer to sit down with you, that doesn’t mean the financing will be easy to get. Because of your poor credit, the rates, monthly payments and fees will be high. Even with excellent credit, a used car loan is not cheap.
Feel good that the person working with you through Auto Credit Express is a car dealer who will do business with you and not just sell you a new car because they might get a paycheck.
Auto Credit Express specializes in bad and good credit financing for used vehicles. Their in-house car dealership financing has multiple financing options no matter what your credit status. You can choose a fixed interest rate or a variable rate loan, depending on what will work best for you. Each dealer is different and that’s where Auto Credit Express can help you with that decision.
MyAutoLoan.com: Best Loan Comparison Site
Capital One: Best Big Bank Loan for Bad Credit
In the US, the vast majority of car dealership financing is offered through lenders that specialize in auto loans. These lenders have name recognition and you know exactly what you’re getting when you sign on the dotted line with them, which facilitates the car buying process for consumers.
You may be surprised to learn that many of these lenders also offer financing to consumers with poor credit. However, the terms are often unfavorable. They offer subpar rates and terms. In addition, if you have poor credit, chances are you have poor or no credit history. These auto finance companies will require you to sign loan paperwork that stipulates what kind of rate you’ll be offered.
Because they are part of a dealership, the rates are always more expensive than those offered by banks or credit unions. However, in some cases, these auto loan lenders may be more appealing than banks. Your best bet is to shop around and try to get financing from competing companies and compare your options.
LightStream: Best for Fast Funding
High Rates But Low Fees.
LightStream gets praise for excellent customer service, superior technology and a streamlined online application process. Their stable of auto loans has now expanded to include auto refinancing and home loans, which will be a boon to the many people who have been shut out of the housing and auto markets. Their rates are high, and loan fees are steep, but this is balanced by an extremely fast turnaround on each application. LightStream is really quick when it comes to getting funds directly into your bank account, and in many cases, the loan is approved before you even finish the application.
What You Need To Know When Applying For A Car Loan With Bad Credit
If your credit is less than perfect, you might be having a hard time getting approved for car loans. It’s not necessarily that your credit is bad that’s the issue, but rather that you do not have much of an established credit history. Car loan lenders want to be assured you can make your payments on time and that you are trustworthy. Credit history shows them that you have paid your other bills consistently over the years. The problem is, many lenders do not want to take a risk that you’re going to fall even more into debt if you get a new car.
You may think this is unfair. And it is. Getting a car is not a matter of credit alone. In fact, your income is a much bigger factor than most people realize. If you can prove with your income that you’re able to afford a car loan payable over the next five years, you’re going to have a very hard time being turned down.
Interest rates and fees matter.
Let me tell you a story. I bought my very first car – a 14-foot-long Jeep Comanche – back in college when I couldn’t afford insurance. It was a used car, and I took out a loan from the car dealer. This was the first time in my life I applied for credit. The dealer lied to me and gave me a lower interest rate when I closed the loan. So I was happy.
But after a couple of years, I refinanced the loan because I wanted to pay off the whole loan amount in one go. I was shocked to see how high the monthly payment was. It was way higher than what I expected. And the finance guy told me the interest rate was 20 percent. I was like, “What?”
The dealer didn’t tell me anything about the financing. For some reason, dealers do not mention it. I talked to a couple of my friends about this, and they had similar experiences. I was really angry at that particular car dealer.
Just to make sure you do not go through the same experience, I am going to share a couple of tips.
Take steps to improve your credit score before you apply.
It’s very important to determine the type of loan with which you may be lucky enough to be approved. A loan for 2017 Ford F 150 trucks is not the same as a loan for a 2011 Honda.
So before you start looking for a loan, find out what you need a car loan for.
If you’re going to be driving a lot of miles and want to make sure you have a reliable car, you may want to look at an early model of your favorite brand within the limited price range you will be able to afford with your credit history.
Consider purchasing a used car if your credit history is limited such that a new car loan is out of your reach.
Compare loan terms.
No matter what type of car loan you choose to finance that new ride, financial experts recommend you choose a term from three to five years. A longer loan term typically will save you more money in the long-run. But, if you’re having trouble getting financing and need to put a down payment on a car, choosing a two-year loan term will allow you to afford your monthly car payments with a lower down payment.
Switching to a shorter loan term also is a smart move if your credit score has improved and you’re shopping for a car loan to pay off some existing debts. In this situation, it’s advised to keep your loan between three and five years, as longer debt is likely to hurt your long-term financial health.
With that in mind, if you’re looking for a loan to pay off credit card statements, it’s a good idea to borrow for less than two years. This will keep the payments low and help eliminate all that credit card debt.
Getting prequalified online can help.
One of the first things that is needed to apply for a car loan with bad credit is to get preapproved by a lender who can give a decision on auto loan value, interest rate, and monthly payment. Without preapproval, even if you found a car you wanted to buy, you would not be able to get a loan. Knowing you would get the loan at the advertised price is very important or you could end up finding a car you really like only to find later that you cant afford to buy it.
You want to get preapproved as soon as you make the decision to buy a new car, preferably before you start looking for a car. The best thing is to get preapproved through the dealer that you want to buy from.
Dealerships have their own lending department and get maximum benefits from preapproving you for a loan.
You can get pre-qualified online by filling out a credit application on the car dealer’s website. This only takes a few minutes to do. You will answer a few questions about income, debt, etc. and the dealer will send you information about how much you can borrow based on what the dealer has in inventory.
Watch out for loan restrictions.
One of the most common mistakes people make when shopping for a car loan is failing to read the fine print.
If you don’t carefully review the restrictions on the loan, you may find yourself unable to use a valuable benefit like special financing or deferred payments, or you may discover that you’re paying a premium for loan insurance, which is often a bad deal.
Before you get in too deep, make sure you know what a car loan can and can’t do for you.
Bad credit car loans don’t have to be forever.
If you have bad credit, you may have given up on the idea of buying a new car. If you’re struggling to pay your current loan off, or if it’s just time for a new car, bad credit car loans can be the solution for you.
If you can’t get financed from the dealer, a bad credit car loan can be the answer. These loans are especially effective when you have a high credit score.
The loan amount, reduced interest rates and flexible terms will put money in your pocket. To be eligible for a bad credit car loan, your credit score must fall between 550 and 640, although you’re likely to receive a lower interest rate with a score above 620.
With multiple lenders competing for your business, you can shop around for the best bad credit car loan. Rates may vary substantially based on your credit score.
How to Get the Best Rate
Do you have bad credit? Are you coming up short every time you conduct a car loan comparison? If so, read on. We will discuss the factors that should be considered in getting the best rate when you need a car loan with bad credit.
First of all, you need to find your credit score. Credit agencies like Experian and Equifax provide consumers free copies of their credit reports. Get your credit score and make sure you understand what is causing you to fall short on your credit score.
The second thing that you should do is get your credit score from more than one credit agency. This will help you get a better snapshot of your situation. In addition, if there are errors on the report, they will inevitably show up on more than one report.
Once you have your credit score, search for a loan company that will work with you. Consider your choices. Here are some examples of good choices for people with bad credit:
AmeriCash Loans: AmeriCash loans offers car loans for bad credit. The car loan repayment term is for five years but it can be refinanced if you can get the same amount or more from a bank or financial institution.
Check your credit score.
You can obtain your credit score at a number of sources, such as one of the three major credit bureaus. Experian, Transunion, and Equifax are the nationwide credit bureaus used to generate credit reports for banks and credit unions. These credit bureaus are responsible for compiling major pieces of information on your credit history, which is used to create your three-digit credit score.
Improve your credit over time.
Looking for the best car loans for people with bad credit can be discouraging. But that’s the last thing you should do. If you do, you’ll feel even worse about your credit score.
What you should do instead is to improve your credit over time. This will be a slow process and don’t expect to raise your credit score in a few months.
What you can do instead is to focus on your credit score at least once a month or more often if you have the time. After all, if you take a look at your report on a regular basis you’ll see how your score is improving.
What you should do also is to get rid of debts that are negative impacts on your credit. Find out how much your interest rates are, how much you owe and most importantly when does your loan expire.
This will give you a clearer picture of your financial situation and there are a lot of credit repair companies that can help you at this particular stage. You’ll be much better off when you tackle your debt problem and get your score in the positives.
Before you do anything else, try to clear any debts that have a negative impact on your credit score. At the same time, focus on paying off your existing debts earlier. By doing this, you’ll improve your credit rating.
Check your credit reports.
Compare loan offers from at least three lenders.
Most people with bad credit need to get car loans to finance their car purchases. Bad credit can happen to anyone, but many attribute it to making irresponsible choices during an otherwise good credit history. However it happens, it can make it significantly harder to get financing.
Having bad credit influence not only the way you get financed but also the interest rates you pay. Sometimes, you may be denied credit entirely.
You can significantly improve your chances of being approved for a car loan by getting pre-approved for one. This will assure potential lenders you are serious about purchasing a car.
Be flexible with repayment terms.
When you have bad credit, you may not qualify for the best car loan rates. But that doesn’t necessarily mean you can’t find the best car loan for your situation. In fact, you may be able to secure a good loan by being versatile and flexible.
Be flexible with the term of the loan. An auto lender may allow you to fund the purchase based on a four-year loan, for example, instead of a three-year loan. You can pay a higher monthly payment or start by making larger payments to get out of debt faster. It will be tougher at first, but you won’t have to pay off as much interest over the course of the loan. Starting out with a larger monthly payment will help you build a positive payment history.
Be flexible with where you’re paying your loan. As long as you can pay on time, you can look for loan opportunities at more than one location and use them to boost your credit. Using a new financial resource as a point of reference for your payment history with a credit rating agency can help you boost your credit score.
How We Chose the Best Auto Loans
Buying an automobile can be expensive, and when you have bad credit, it can cost even more.
You need a reliable transportation that will help you get to work or take the kids to school. And sometimes, choosing a car loan with a bad credit rating can seem like a confusing and daunting task.
Fear not, we have the scoop on the best car loans for people with bad credit.
Choosing a good auto loan will make a big difference as to whether you end up in debt and hate you car or end up with a great interest rate and car you love.
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Summary: Best Bad Credit Card Loans of 2022
Getting a bad credit car is less difficult than you think. However, the whole process can be tedious and time consuming.
There are lenders out there that offer bad credit car loans. The trick is finding the lender that is right for you.
You want to find a lender that offers an exclusive list of vehicles and financing options that will best fit your individual needs.
Here are a few things to consider that will help you along the way to finding the right bad credit car loan for you.
Things to Consider before Applying for a Bad Credit Car Loan
Down payment and monthly car payments
One of the biggest mistakes you can make when looking for a bad credit car loan is not budgeting your down payment and monthly car payments correctly.
You need to know how much you’re going to be spending each month on your bad credit car loan. Your monthly car payments should be your top priority when looking for a bad credit car loan. You should be sure to include taxes, fees, registration, and any other fees that may apply.
Pre-Approval and shopping for your bad credit car loan
A pre-approval bad credit car loan will give you a starting point when searching through available financing options and vehicles.