How to buy a car with bad credit
However the situation arises, bad credit* doesn’t necessarily signal the end of the road for car shoppers. In fact, the good news is that there are many qualified buyers with poor credit who are taking the wheel with the help of financing. And they can enjoy a lot of the same conveniences as buyers with better credit, such as preapproval.
Every car shopper’s position is different, and planning your car-buying process will help you understand what’s right for your situation, and how best to achieve it. Here’s how to approach car loans when you have bad credit.
Be sure to do your research
You might already have an idea of the car you want to buy, but the Consumer Financial Protection Bureau recommends taking a look at your financial circumstances, including credit history, budget, and what you can afford, before shopping for a vehicle.
Credit scores and credit reports
It’s not the sole factor, but your credit score plays a key role in determining whether you will be approved for an auto loan and, if so, what interest rate you will get. Credit score is based, in part, upon the credit history contained in credit reports, so the CFPB advocates getting hold of a copy of these reports to check for errors that could limit your access to financing. You can request a copy of your report from each of the major credit bureaus at AnnualCreditReport.com.
What can you afford?
Estimating what you may be able to afford is an important step toward making the right purchase, and RoadLoans’ online calculators will give you a hand. Use the affordability calculator to enter a monthly payment, loan term, annual percentage rate and down payment to suggest what you can spend on a car in total. Similarly, enter loan amount, APR and money down into the monthly payment calculator to gauge what an affordable auto payment may be.
Understand the numbers
Annual percentage rate, loan duration and money down have important effects upon your potential financing costs. Learn more about these effects, below.
Annual percentage rate
APR includes the interest rate to be charged on the principal loan amount (the sum borrowed to buy a vehicle) and any transaction fees that are rolled into the loan. All other things being equal, a higher APR will increase the monthly payment and how much is paid for a car over the life of the loan. A car buyer’s APR can be affected by a range of criteria, such as credit history, current interest rates, competition, market conditions and special offers.
By changing the length of the loan on the calculator, with APR and down payment unchanged, you’ll see how monthly payment is affected. A longer term, with a greater amount of time to pay back the loan amount, reduces the monthly figure, while a shorter loan period results in a higher payment. You may end up paying more for a vehicle over the course of the loan with a longer term, when interest charges are taken into account, than with a shorter one. Both loan term and interest rate are often negotiable for qualified applicants.
When financing a car with bad credit, a down payment, trading in your current vehicle, or both, can be particularly helpful. Each may lower the principal loan amount required to purchase a car and lower your associated financing costs. They also show a lender looking to assess a bad credit risk that you’re committed to the deal.
What about a co-applicant?
A co-applicant is another good way to strengthen a car loan application. If approved, a co-applicant becomes a co-borrower who enters into a joint auto loan, and each borrower has equal rights to the vehicle and obligations to repay the loan. Choosing a creditworthy co-applicant may help you get approved and open the door to better terms, such as a larger loan amount or lower interest rate
Choosing an affordable vehicle
By running the numbers on a loan, you’ll have an estimation of the financing that’s right for you and what kind of vehicle may be in your price range. When choosing a vehicle, car shoppers with bad credit might think about opting for used over new, and an older model rather than a later one. Everyone’s automobile needs and preferences are different, and if fuel economy is a factor for you, use our fuel savings calculator to work out potential expenditure on gas for one vehicle versus another.
Financing a car after bankruptcy, and with no credit history
Consumers who have a discharged bankruptcy on their record, or no credit experience, might think auto financing is off the table. But there are lenders, such as RoadLoans, that accept applications from people with all types of credit. A decent down payment, vehicle trade-in and co-applicant are all worth considering in these situations. And, at RoadLoans.com, you can enjoy the same straightforward application process regardless of your credit score.
Advantages of online auto loans
As a direct lender, RoadLoans makes car loans with bad credit simple. Our online process cuts out the middleman to offer car buyers several advantages.
- It takes just a few minutes to apply from work, home or your mobile device, with no pressure.
- We provide instant decisions so there’s no delay.
- Approved applicants can review multiple loan offers tailored to their needs and select the best option.
- Preapproval enables RoadLoans customers to shop with the confidence of a cash buyer, already knowing the terms of their loan. On arrival at the dealership, they’re ready to select their vehicle and negotiate a great deal on price.
If you have any questions about online auto loans and the financing process, our knowledgeable loan specialists are available to help. Call (888) 276-7202 or use our chat service.
Finding a dealership nearby
Few people enjoy spending hours at a dealership, and finding the right dealer from the start can make buying a car with bad credit quick and easy. RoadLoans works with more than 14,000 auto dealerships across the country that are able to show customers select cars, trucks and SUVs meeting our requirements for age, mileage and financing. Details of a preferred dealership, located nearby, are included in each customer’s loan documents to help the car-shopping process run smoothly.
Apply for a Car Loan Online
It’s free, takes just a few minutes and you’ll get an instant decision.
Looking to refinance?
If you already have an auto loan, bad credit, and want to refinance your note, learn more about auto refinancing with RoadLoans. Our refinancing programs may have options for you and, if approved, you may enjoy benefits such as a lower monthly payment and APR.
Discover auto refinancing options.Learn More
No Credit History?
You can still apply for an auto loan with no credit experience.Learn More
Auto Loans After Bankruptcy
Understand how to tackle car loans after bankruptcy.Learn More
New and Used Car Loans
Know the process for new and used car loans.Learn More
* “Bad” or “Poor” credit generally is considered a FICO score around 600 and below by sources including the Consumer Federation of America and National Credit Reporting Association (reported by the Associated Press), Bankrate.com, Credit.com, Investopedia, NerdWallet.com and others. The Congressional Budget Office identifies a FICO score of 620 as the “cutoff” for prime loans. FICO scores are not the sole factor in lending decisions by RoadLoans.com and Santander Consumer USA.