How to Get a Used Car Loan With Bad Credit

Would you like to get a used car loan, but you don’t think you can because you have bad credit?

Bad credit is no longer a reason not to buy a used car.

Experian Automotive found that the average credit score for a used car is 659.

People are paying their loans back on time because the loan terms are longer and more affordable. That gives lenders more flexibility in the loans they offer.

As a result, the number of loans to buyers with poor credit scores increased by 11.4% since 2012.

Now that you know it is possible to get a used car loan, keep reading to learn how you can get the best loan.

Check Your Credit

The first step that you’ll need to take when you’re shopping for a loan is to check your credit.

You need to see where you stand, and you can take that information to lenders as you’re shopping around.

Lenders may say that you had a recent issue on your credit report and that they can’t give you a better rate. You can arm yourself with the most recent information to dispute those claims.

You’ll want to get a recent check of your credit report and FICO scores. Go to and has your three separate FICO scores from each credit bureaus (Experian, Transunion, Equifax).


Setting a proper budget is going to be a big factor to determine how much car you can afford. You’re going to want to spend no more than 20% of your income on car payments.

Also, bear in mind that it’s up to you to maintain the vehicle while you own it. You’ll want to factor in maintenance & repair costs, insurance, and gas.

To lower your costs, you can use inexpensive parts that will keep your car running and won’t break the bank.

Now that you know your credit score, you can take that information to estimate a monthly payment. You’ll have to know how much you’re going to put down or trade-in, what your interest rate will be based on your credit.

If you have a poor credit score that’s below 550, you could pay as much as 18% in interest.

Lenders have been able to lower monthly payments, but the loans are stretched out over a longer period of time.

You want to make sure the used car that you buy will last longer than the used car loan.

Shop for Loans at the Right Places

Where can you get a used car loan if you have bad credit?

Unfortunately, there are a lot of lenders who prey on people with poor credit. Remember that you still have power in the transaction, even if you have bad credit.

You may feel that your options are limited, or you can only qualify for a high-interest rate loan. It’s important to remember that you always have options.

It’s best to avoid getting financing from a dealer, even though it’s convenient. They usually have higher rates, and they’re less willing to negotiate with on the final price of the car if you are getting from them.

Check with banks and credit unions first.

During this process, lenders will do a soft-credit pull to see if you pre-qualify for a loan. It doesn’t guarantee that you’ll get the loan or the terms of the loan. This pull doesn’t damage your credit score.

To finalize a loan or pre-approval, banks will do a hard credit pull, which does impact your credit score.

That’s why it’s important to shop for loans in a two-week time period before buying to minimize the damage to your credit.

Waiting longer in between credit pulls can pull down your credit score, making it more difficult to get a loan at a decent interest rate.

Get Preapproved

Getting preapproved for a used car loan will give you negotiating power when it’s time to buy. You’re treated as a cash buyer.

Without the pre-approval loan, you’re sold a car based on the monthly payment, where it becomes easy to forget about the length of the loan, what the car will be worth at the end of the loan, and how much you’ll really pay for the loan.

When you do negotiate the price, make sure you leave room for taxes and fees.

If you walk in with a $15,000 pre-approval letter, that doesn’t mean that you should get a $15,000 car. Aim for something around $12,000 to make sure taxes and fees are covered.

Get a Co-Signor

If your credit score is in bad shape and you don’t want to pay up to 18% in interest, there is another option.

You can have someone co-sign your loan for you.

If you have a friend or relative that trusts you and knows you will pay the loan back on time, you could ask them to be joint-loan applicants.

The key is to make sure they have good credit. That can lower your interest rate and your monthly payments.

Note that by having a co-signor, they are responsible for your payments and their credit could get damaged if you miss or make late payments.

When Your Car Loan is Paid Off

Once your used car loan is paid off, you own the car free and clear of any debt. That means that you can sell the car or use the car to get a short-term loan if you’re in a pinch for cash.

Companies like Todays Financial Services offers auto title loans where you get a small amount of cash, and pay it back within 12 months.

You offer your car title as collateral, meaning that if you’re late on payments or fail to pay back the loan, the company can take your car.

Get a Used Car Loan Today

Getting a used car loan with bad credit has become easier over the last few years. More loan companies are

As long as you know what you can afford and stay within budget, you can pay off that loan in no time and improve your credit in the process.

Check out our consumer blog for tips on everything from finding the right insurance company to finding great books to read.

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