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Best Car Loans for Bad Credit in 2024

Written by:  Joe Chappius
|
Editor:  Sam Onelia
Last updated: September 9, 2024

Finding a car loan for bad credit can be tough as most lenders approve applicants with good to excellent credit. However, with Financer.com you can:

  • Apply for a car loan with a credit score of less than 690
  • Compare lenders online
  • Apply for a car loan online in minutes

Start Comparing

How much would you like to borrow?

If you’re in the market for a car but your credit score isn’t stellar, don’t lose hope.

This guide will walk you through everything you need to know about bad credit car loans in 2024, including top lenders, current interest rates, and strategies to improve your chances of approval.

Quick Answer: Best Car Loans for Bad Credit 2024

  • Best Overall: Capital One Auto Finance – Offers pre-qualification without affecting your credit score
  • Best for Very Bad Credit: Auto Credit Express – Specializes in loans for credit scores under 600
  • Best for Comparing Multiple Offers: Autopay – Connects you with multiple lenders for easy comparison
  • Best for Fast Funding: LightStream – Offers same-day funding for qualified borrowers
  • Best for Used Cars: MyAutoLoan – Provides competitive rates for used vehicle purchases

What Is a Bad Credit Car Loan?

A bad credit car loan is an auto financing option designed for borrowers with poor credit histories, typically with credit scores below 619.

While these loans often come with higher interest rates, they provide an opportunity for individuals with less-than-perfect credit to secure the financing they need to purchase a vehicle.

Key Features of Bad Credit Car Loans:

  • Higher interest rates compared to standard auto loans
  • Potentially higher fees to offset the lender’s risk
  • More flexible approval criteria
  • Opportunity to rebuild credit with timely payments

Best Lenders for Car Loans with Bad Credit in 2024

We’ve researched and compiled a list of top lenders offering car loans for people with credit scores below 619. These lenders provide online applications and competitive terms for borrowers with challenging credit situations.

    Top Bad Credit Car Loan Lenders

  • Capital One Auto Finance

  • Autopay

  • Digital Federal Credit Union

  • Prestige Financial

  • Credit Acceptance Corp.

  • LightStream

  • Carvana

Detailed Look at Top Lenders

Let’s examine some of these lenders in more detail:

1. Capital One Auto Finance

  • Interest Rate: Not publicly disclosed, but competitive for bad credit borrowers
  • Key Features: Prequalification with soft credit pull, fully online experience
  • Why Choose: Ideal for those who want to check rates without impacting their credit score

2. Autopay

  • Interest Rate: Higher than prime rates, but competitive for bad credit
  • Key Features: Specializes in bad-credit car loans, offers interest rate discounts
  • Why Choose: Great for borrowers looking for a lender that understands bad credit situations

3. LightStream

  • Interest Rate: 7.24% – 15.19% (fixed APR)
  • Key Features: Unsecured auto loans, quick funding, wide range of loan amounts
  • Why Choose: Excellent for those who prefer an unsecured loan option and fast funding

Compare loans from 79 lenders

Find the cheapest rate with one click

Comparison of Top Bad Credit Car Loan Lenders in 2024

To help you make an informed decision, we’ve compiled a comparison table of the top lenders offering car loans for bad credit. This at-a-glance view allows you to easily compare key features, interest rates, and eligibility requirements.

LenderInterest Rate RangeMinimum Credit ScoreLoan Amount RangeSpecial FeaturesBest For
Capital One Auto FinanceVaries (not disclosed)500$4,000 – $100,000Pre-qualification with soft credit pullChecking rates without impacting credit score
Autopay3.99% – 17.99% APR600$2,500 – $100,000Rate discounts availableBorrowers looking to refinance existing auto loans
Digital Federal Credit Union5.99% – 18% APRNo minimumUp to $100,000Interest rate discounts availableCredit union members seeking flexible options
Prestige FinancialVaries (higher for bad credit)No minimumNot disclosedConsiders applicants with bankruptcy historyThose with recent bankruptcy filings
Credit Acceptance Corp.Varies (higher for bad credit)No minimumNot disclosedWorks with unemployed borrowersThose with very poor credit or no employment
LightStream7.24% – 15.19% APR660$5,000 – $100,000Unsecured loans availableFast funding and flexible use of funds
CarvanaVaries (higher for bad credit)No minimumNot disclosedAll-in-one car buying and financing platformThose who prefer an online car buying experience

Please note that the interest rates and terms provided are general ranges and may vary based on your specific credit profile, income, and the vehicle you’re purchasing.

Key Takeaways from the Comparison:

  • Capital One and Autopay offer pre-qualification, which is great for checking rates without impacting your credit score.
  • Digital Federal Credit Union and Prestige Financial don’t have minimum credit score requirements, making them good options for those with very low scores.
  • Credit Acceptance Corp. stands out for considering unemployed borrowers.
  • LightStream offers the lowest potential APR but has the highest credit score requirement.
  • Carvana provides an all-in-one solution for those who prefer to handle the entire car buying process online.

Types of Lenders for Bad Credit Car Loans

When searching for a bad credit car loan, you have several options to consider:

  • Credit Unions: Often offer competitive rates, especially if you’re already a member.
  • Online Lenders: Provide fast application processes and competitive rates. Easy to compare multiple offers.
  • Online Car Dealerships: Such as Carvana, offer both vehicles and financing options.
  • Traditional Car Dealerships: May have existing relationships with various lenders, including those specializing in bad credit loans.

How to Improve Your Chances of Getting Approved for a Bad Credit Car Loan

While bad credit can make it more challenging to secure an auto loan, there are steps you can take to improve your chances of approval:

Steps to Boost Your Car Loan Approval Odds

Follow these steps to increase your chances of getting approved for a car loan with bad credit:

Step 1

Get Prequalified

Many online lenders offer prequalification with a soft credit check, which won’t impact your credit score. This can give you an idea of what rates you might qualify for.

Step 2

Consider a Cosigner

Having a cosigner with good credit can significantly improve your chances of approval and may help you secure a lower interest rate.

Step 3

Save for a Down Payment

A larger down payment reduces the loan amount, which can make lenders more willing to approve your application.

Step 4

Improve Your Credit Score

Take steps to improve your credit score over time, such as paying bills on time and reducing your credit utilization ratio.

Step 5

Shop Around

Compare offers from multiple lenders to find the best terms and rates for your situation.

How to save $619.00 on your loan

The price difference for a $500.00 loan in 90 days is $619.00.

Find out how

The Impact of a Car Loan on Your Credit

While a bad credit car loan typically comes with higher interest rates, it can also be an opportunity to improve your credit score over time. Here’s how:

  • Consistent, on-time payments can positively impact your payment history, which is the most significant factor in your credit score.
  • An auto loan adds to your credit mix, which can boost your score if you previously only had credit cards.
  • As you pay down the loan, your credit utilization ratio may improve, potentially increasing your score.

Pro Tip:

Before applying, check if the lender reports payments to the major credit bureaus (TransUnion, Experian, and Equifax). This ensures your on-time payments will help build your credit history.

Red Flags to Watch Out For in Bad Credit Auto Loans

While many lenders offer legitimate bad credit auto loans, some may engage in predatory practices.

Being aware of these red flags can help you avoid costly mistakes and potential scams. Here are key warning signs to watch out for when seeking a bad credit car loan:

    Common Red Flags in Bad Credit Auto Lending

  • Pressure to make an immediate decision

  • Focus solely on monthly payments

  • Unexplained or excessive fees

  • Conditional loans requiring add-ons

  • Yo-yo financing scams

  • Lack of transparency about loan terms

  • Requests for upfront payments

1. Pressure to Make an Immediate Decision

Legitimate lenders will give you time to review the loan agreement and think about your decision.

Be wary of any lender or dealership that pressures you to sign immediately or uses high-pressure sales tactics like “this offer is only good today.”

2. Focus Solely on Monthly Payments

While affordable monthly payments are important, focusing solely on this aspect can mask a high total cost.

Some predatory lenders may offer low monthly payments but extend the loan term excessively, resulting in much higher overall interest paid.

3. Unexplained or Excessive Fees

Be cautious of loans with numerous or high fees, such as origination fees, processing fees, or prepayment penalties. Always ask for a breakdown of all fees and ensure you understand what each one is for.

4. Conditional Loans Requiring Add-ons

Some lenders may make loan approval contingent on purchasing additional products like extended warranties or gap insurance.

While these products can be beneficial, they should be optional, not required for loan approval.

5. Yo-yo Financing Scams

In this scam, a dealer lets you drive away with a car before loan terms are finalized. Days or weeks later, they claim the financing fell through and demand you sign a new contract with worse terms.

Always ensure financing is final before taking the car.

6. Lack of Transparency About Loan Terms

Reputable lenders will be upfront about all loan terms, including interest rate, loan duration, and any fees. If a lender is vague or unwilling to provide clear, written terms, consider it a red flag.

7. Requests for Upfront Payments

Be cautious of lenders asking for upfront payments via cash, gift cards, or wire transfers before approving your loan. Legitimate lenders typically deduct their fees from the loan amount rather than asking for money upfront.

Protecting Yourself:

  • Always read the entire loan agreement before signing
  • Ask questions about anything you don’t understand
  • Get all promises in writing
  • Take time to shop around and compare offers
  • Consider bringing a trusted friend or family member when finalizing the deal
  • If something feels off, trust your instincts and be prepared to walk away

If you suspect a lender of engaging in predatory practices, consider reporting them to your state’s attorney general’s office or the Consumer Financial Protection Bureau (CFPB).

Frequently Asked Questions About Bad Credit Car Loans

FAQs

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

Yes, it’s possible, but it may be more challenging. You might face higher interest rates or need to provide a larger down payment. Consider lenders like Credit Acceptance Corp. or Prestige Financial, which specialize in very poor credit situations.

How much should I expect to pay in interest for a bad credit car loan?

Interest rates for bad credit car loans can range from 9% to over 20% APR. The exact rate depends on factors like your credit score, income, loan term, and the lender’s policies.

Is it better to get financing from a dealership or an online lender?

Both options have pros and cons. Online lenders often offer more competitive rates and a streamlined application process. Dealerships might be more flexible with approval but could have higher rates. It’s best to shop around and compare offers from both sources.

How long should my loan term be if I have bad credit?

While longer terms mean lower monthly payments, they also result in paying more interest over time. Aim for the shortest term you can comfortably afford. A 48 to 60-month term is often a good balance for many borrowers.

Our Commitment to Transparency
At Financer.com, we're committed to helping you with your finances. All our content abides by our Editorial Guidelines. We are open about how we review products and services in our Review Process and how we make money in our Advertiser Disclosure.
Author Joe Chappius

Joe is a seasoned financial adviser with over a decade in the industry, and Head of the US Market at financer.com. Throughout his career, he's directly assisted families, high-income individuals, and business owners with their financial needs. Joe draws on his wealth of client-facing experience to author insightful and high-quality financial content.

Editor Sam Onelia
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