Need a car loan with bad credit? Given our nation’s economic tribulations, it can be tough to get a bad credit auto loan…unless you take advantage of our service, that is!
The economy has been rough on everybody’s credit score, and that’s why, when you apply online, we connect you to car loan companies who are still able to finance people that have bad credit. Keep in mind, it’s best to supply a down payment, if you can, to balance out the costly rates of interest you can anticipate.
Buying a Car with Bad Credit: 3 Tips
Finding a lender who is willing to provide auto loans for people with bad credit is only one part of the task at hand. You also have to find the right car to purchase. Here are 3 tips to make sure you get the most out of your car loan package.
- Pre-Arrange Your Auto Loan: This is one of the key principles to financing any car, especially with below-average credit. Finding the right lender who offers the right APR rate is key. Also, not every lender will approve you. That’s why you need to get your auto loan beforehand. Our bad credit car loan application is crucial in the process.
- Choose an Affordable, Fuel-Efficient Vehicle: Financing a car with bad credit puts you at an immediate disadvantage. You want to make sure that you don’t overextend your budget. That means opting for a car that’s affordable to buy, cheap to insure, and not a guzzler at the pump. Gas prices are exceedingly high these days, so factoring fuel economy into your decision is more important than ever before.
- Offer a Down Payment: Save enough cash to provide a 5-25% down payment on your bad credit auto loan. This will a) increase the likelihood of getting your application approved, b) reduce your interest rates, and c) decrease the risk of getting “upside down” on your loan (owing more on your vehicle than its actually worth).
Understanding The Trade-offs
As you know, bad credit is typically defined by a credit score of 620 or lower. Banks, credit unions, and dealers themselves are often reluctant to lend to individuals with such credit ratings for one simple reason: they are afraid that the borrower will default, resulting in a net loss on the arrangement. In order to protect themselves, lenders who do finance people with bad credit charge higher-than-average interest rates. This is the number one disadvantage to getting an auto loan with bad credit. Given a higher rate of interest, you will pay for the vehicle in the end than you would with a lower rate. This is a nearly inescapable, unavoidable part of financing a car with bad credit.
It is difficult to state just what rates you can expect. Your ultimate rate will be dictated by your individual credit profile, location, loan type, loan term, and specific lender. However, we can provide a few generalizations based on data we’ve seen in the last few years:
- Credit Score of 660 to 620: 14-15% APR
- Credit Score of 620 to 590: 18-19% APR
- Credit Score of 590 to 500: 19-21% APR
Keep in mind, these numbers are not to be interpreted as “quotes” or binding in any way whatsoever. To the contrary, they are provided simply to give you a general barometer of what to expect given your own credit rating. Notably, these are for a used car auto loan – new vehicles come with lower rates of interest, but they are not recommended for people with bad credit.
As is clear, the interest rates for bad credit auto loans are indeed very high. This only reaffirms the need to finance a modest, affordable, reliable vehicle. After all, given such rates, the vehicles will end up costing you much more than the sticker price due to the finance charges associated with your loan.