Auto Loans for Bad Credit

Welcome to our platform dedicated to helping people with bad credit secure auto loans. We understand the challenges faced by bad credit borrowers, and we're here to help you navigate the path to car ownership with ease and confidence. That's why we've created our user-friendly bad credit car loan calculator which estimates the loan amount you likely qualify for based on your state, monthly income, and credit score range. No Personally Identifiable Information (PII) is needed to estimate the car loan amount you qualify for.

Estimate Your Bad Credit Car Loan and Get Approved

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Annual incomes under $24,000 with a credit score below 600 may require a qualified Co-signer.

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Bad Credit Auto Loan Options

  • Credit Union Car Loans: Credit unions often offer lower interest rates than traditional banks or subprime lenders, especially for members with good credit standing.
  • Subprime Auto Loans: These loans are specifically designed for individuals with less-than-perfect credit. They typically come with higher interest rates than traditional auto loans.
  • Buy Here Pay Here Car Dealerships (BHPH): These dealerships offer financing directly to customers, regardless of credit history. However, interest rates may be high, and vehicle selection may be limited.

Tips for Buying a Car with Bad Credit

  • Make a Down Payment: A down payment reduces the loan amount, which can lower your monthly payments and potentially improve your chances of approval.
  • Shop Multiple Dealerships: Compare vehicles and monthly payments at multiple bad credit car dealerships to secure the most favorable deal.
  • Consider a Used Car: Used cars typically have lower sticker prices and depreciate slower than new cars, making them more affordable for bad credit borrowers.

Our Bad Credit Auto Loan Tool

On this page, you'll find a user-friendly form that allows you to select your state of residence, input your monthly income, and choose your credit score range. Let's break down how each factor affects your eligibility for a car loan with bad credit:

  • State of Residence: The state you reside in can influence the loan amount you qualify for due to variations in interest rates, taxes, DMV fees, and other factors. We consider these differences when providing your loan estimate.
  • Monthly Income: Your monthly income is a crucial determinant of how much you can afford in car payments. The higher your income, the more likely you are to qualify for a larger loan amount.
  • Credit Score Range: Your credit score plays a significant role in determining your auto loan eligibility and interest rates. It's a numerical representation of your creditworthiness, based on your past credit history. Credit scores range from 300 to 850, with higher scores indicating better creditworthiness.

New and Used Car Loan Amounts

Based on the information provided, our tool will estimate the loan amount you qualify for when buying a new car or a used car with bad credit. Here's how we determine these amounts:

  • New Cars: We take into account factors like your credit score, state of residence, monthly income, and average DMV and Dealership Fees, to estimate the maximum loan amount for purchasing a new car. This will help you narrow down your choices and find a vehicle that suits your budget.
  • Used Cars: Since interest rates are higher on used car loans compared to new car loans we provide estimates for both new and used vehicles. Understanding the maximum loan amount for a used car will give you flexibility in your car-buying journey.

After you've received your car loan estimate, decide whether it meets your expectations. If so continue to the next step in the credit application process. We have partnerships with reputable companies experienced in bad credit auto financing.

Frequently Asked Poor Credit Car Financing Questions

Yes, it is possible to finance a new car even if you have little or no money to put down, and lenders often favor new cars, irrespective of your credit rating. One option is to use a new car rebate as a down payment, making it more accessible for individuals with tight budgets. To simplify your search, we have compiled a list of the best new cars for bad credit. This list is updated monthly and highlights affordable new car options that come with generous rebates.

In most cases, a lender will provide pre-approval based on your credit history, job tenure, income, and down payment. However, there are instances where the pre-approval amount may not be sufficient to purchase a specific vehicle you desire. In such cases, having a co-signer with good credit can help improve the loan terms.

Car loan approvals are not typically determined based on the down payment. Instead, they often specify a maximum Loan-to-Value (LTV) ratio based on your credit rating and a maximum monthly payment based on your income. Armed with this information, the dealership's sales manager will present vehicles you qualify for based on your down payment. If you have no funds available for a down payment, opting for a new car with a rebate may be the most suitable choice.

Typically Not. The Red Flags Rule, administered by the Federal Trade Commission (FTC), necessitates that automotive dealers and lenders create and implement a formal program for preventing identity theft. This program is designed to identify, detect, and address specific warning signs, commonly referred to as "red flags." These red flags serve as potential indicators that a customer or potential customer may be trying to obtain a loan or lease at the dealership, either directly or indirectly, using stolen information. To abide by the FTC Rule dealerships and lenders view the credit report to see if there are any warning signs, or Red Flags.

Yes. Having bad credit doesn't necessarily prevent you from trading in a car that still has an outstanding balance, but it might restrict your options when it comes to choosing a new vehicle. If the amount you owe on the trade-in exceeds its current value, the shortfall will need to be incorporated into the new loan, commonly referred to as "rolling it in." Lender guidelines dictate the maximum amount that can be rolled into the new loan based on the buyer's credit score; the lower the score, the less can be rolled over. Consequently, individuals with bad credit often find it advantageous to trade in a vehicle they still owe money on for a new one, particularly if the new vehicle comes with substantial manufacturer rebates to bridge the negative equity gap. For conveinece we've compliled our monthly list of the best new cars to absorb negative equity highlighting new cars with generous rebates.

Lenders typically determine approvals based on maximum monthly payment amounts rather than specifying loan amounts. This approach is adopted because interest rates and repayment terms can vary depending on the age and mileage of the vehicle you're considering. Generally, newer vehicles with lower mileage tend to come with more favorable financing terms compared to older vehicles with higher mileage.

For instance, imagine there are two vehicles both priced at $20,000 on a dealer's lot: one is just one year old with 15,000 miles, while the other is six years old with 80,000 miles. In this scenario, the newer vehicle would likely result in a considerably lower monthly payment.

If you're looking to estimate how much you might be able to borrow for a low mileage late model new or used car, please complete the form above. This will give you a general idea of your financing options.

Many subprime lenders are willing to approve car loans for individuals with poor credit, provided that the loan amount doesn't exceed a 110% Loan-to-Value (LTV) ratio. This ratio is calculated using the invoice price for new cars and the average trade-in value for used vehicles. As a general guideline for people with poor credit, it's advisable to have enough cash on hand to cover the Tax, Title, and License fees, which typically add up to around 10% to 15% of the total sales price. However, it's worth noting that down payment requirements may increase if you have a trade-in with negative equity.

If your bankruptcy is discharged or dismissed, the process is relatively straightforward. If it's still open, the outcome depends on the type of bankruptcy you filed (Chapter 7 or Chapter 13).

  • Chapter 7: Numerous subprime lenders offer approval for auto loans even in cases of bankruptcy. Some of these lenders are willing to approve the loan either before the discharge or following the Initial Meeting of the Creditors, commonly known as the 341 meeting.
  • Chapter 13: Few subprime auto finance companies approve loans for people in a Chapter 13 bankruptcy. Those that do usually require an Authorization to Incur Debt from the bankruptcy court trustee.

Having a previous repossession doesn't necessarily prevent you from getting an auto loan if:

  • The repossession was part of a Chapter 7 Bankruptcy.
  • The repossession is older with a zero balance or the balance was written off by the creditor.

If the repossession was recent, not part of a bankruptcy, and still has an outstanding balance, your only option may be Buy Here Pay Here (BHPH) dealerships with in-house financing. They often install geographical tracking and auto-off devices on the vehicle in case of missed payments.

Yes, a trade-in can be considered a form of a down payment, along with cash or a new car rebate.

When you use a cosigner, most lenders base the maximum payment on the lower of the borrower's income and the cosigner's income. The interest rate and repayment terms are typically based on the cosigner's credit. If the cosigner has a good credit score, it can result in a lower interest rate, potentially saving the borrower thousands over the loan term. However, if the cosigner's income is significantly lower than the borrower's, it might limit vehicle choices.

Credit score requirements vary by lender. Banks and OEM captive finance companies usually have strict requirements, followed by credit unions. Subprime auto finance companies consider factors beyond credit scores, often referred to as the SAW principle:

  • Stability: Lenders favor those with stable employment and residence histories.
  • Ability: Lenders prefer borrowers with lower Debt-to-Income (DTI) ratios.
  • Willingness: Lenders favor those whose financial problems were isolated to a specific period rather than those with a long history of non-payment or late payment.

Interest rates vary depending on the lender, your credit score, and the loan terms. Rates can be discussed with specific lenders.

For reference, the national average rates for Q3 2023 based on credit score were:

Source: Experian Q3 2023
Credit Score New Car Rate Used Car Rate
781-850 5.61% 7.43%
661-780 6.88% 9.33%
601-660 9.29% 13.53%
501-600 11.86% 18.39%
300-500 14.17% 21.18%
0 19.95% 25%

Requirements vary by subprime lender but generally include:

  • Being of legal age and a US citizen or Green Card holder with a Social Security number.
  • A disposable income of at least $1,500 per month.
  • A Debt-to-Income (DTI) ratio below 50%, including the new car loan payment.
  • A Payment-to-Income (PTI) ratio below 15%.
  • Proof of Income (POI) and Proof of Residence (POR).
  • It's essential to note that special finance companies independently verify nearly every item on the credit application.

    Cosigners are obligated to repay the loan if the borrower fails to do so. Therefore, cosigners must meet the same income, Debt-to-Income (DTI), and other requirements set by the lender.

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