Good NestingUse one of these lenders, and you can get an auto loan even if your credit score is on the lower end of the spectrum.
Are you in the “bad credit” category? If your credit score is less than 600, you probably are, as many say that determines bad credit. Having a lower credit score does not mean you will have to pay for a new or used vehicle with cash, as there are lenders who will probably be willing to work with you. We’ll take a look at them in a minute, but first, let’s discuss what bad credit car loans are.
How Bad Credit Vehicle Loans Work
The main difference between bad credit car loans and other types of vehicle financing is that they typically charge higher interest rates. Lenders charge these rates since they have to take on higher risks. If you are a subprime borrower with a credit score in the 501-600 range, Experian estimates that you will pay an APR of around 9.41 percent for a new car. If you want to buy a used car, your average subprime APR jumps to 15.96 percent. If your credit score is between 300-500 and puts you in the deep subprime category, your average new car APR will be 12.53 percent. Meanwhile, a used car may hit you with an average APR of 19.87 percent.
If you think higher APRs aren’t a big deal, they certainly are. If you had excellent credit and wanted to buy a $30,000 new car and finance it over 60 months, you could pay $9,000 less than someone with bad credit. In short, a lower APR can lead to significant long-term savings, which is why having solid credit is so important if you’re looking to keep more cash in your pocket.
How To Find Bad Credit Auto Lenders
While you now see the importance of good credit, you still need to find a lender willing to work with you while you’re in the subprime category. Here are several ways to spot such a lender via their advertising:
- Bankruptcies ok
- No minimum income
- No minimum credit score
- No credit check
If you see any such wording in a lender or car dealership’s advertising, they probably offer bad credit auto loans.
As for where to find such loans, you have several options. Many suggest starting with your current bank or credit union for direct lending. Via direct lenders, you could score a solid loan despite bad credit if you have an account in good standing with them.
Many car dealerships offer loans for bad credit since it increases their chances of making sales. Go to local lots, and you may find it very easy to get approved for vehicle financing on the spot.
If those first two options don’t work, looking online may be your best bet. You can fill out a single application through an online car loan marketplace to get multiple offers at once, or you could visit the sites of the following bad credit lenders that are pretty popular: MyAutoloan, Autopay, CarMax, Carvana, Consumers Credit Union, Auto Credit Express, or Digital Federal Credit Union.
