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If you must get a car and have bad credit, then prepare yourself for a high-interest loan. If you have high credit because of your payment history which makes up 35 percent of your credit score , start paying your bills on time. Even a few months of paying bills on time can bump up your credit score. If you can push buying a car off for even a month or two, you might end up with a high enough credit score to make a difference when it comes to interest rates.

Harzog suggests talking to your lender about your credit history if you have a good reason for a negative item.

How to buy a car with bad credit

Some lenders may be willing to work with you depending on the reason for your low credit score. You may end up finding an older vehicle you can afford to buy with cash, eliminating your need to get financing in the first place. Your cosigner will be responsible for making your payments in the event you are unable to fulfill your loan obligations, so only take this approach if you are confident you will be able to make your payments in full and on time.

Provided you are able to make your payments, having a cosigner on your loan can help boost your credit score. In general, a credit score that is or higher will get you the best interest rate on an auto loan. If you have great credit, you might be able to score an auto loan as low as zero percent yes, you read that right. If you have terrible credit lower than , you might be looking at interest rates as high as 20 percent or even close to 30 percent.

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That can add up to paying thousands of dollars extra for an automobile with bad credit versus good credit. Lenders want to feel confident that borrowers will pay their money back on time and in full, which is why consumers with good to great credit get the best interest rates. They pose a low enough risk based on their credit history that lenders feel assured they will pay their debt back responsibly.

Consumers with bad credit, on the other hand, pose a high risk. Things like missed payments, defaulted loans and a high debt-to-income ratio are red flags for lenders, who will charge a high interest rate when they do not feel confident they will get back the money they are lending. In addition to reviewing your credit score, lenders will also take a look at other factors that are not included in your FICO report such as:. Anyone shopping for a car should also shop around for a lender.

In fact, you should always consult with more than one lender before you take out financing for a major purchase. You can get an auto loan from several sources including:. Whether you have no credit history or you have made some mistakes in the past, having a bad credit score can make it difficult to shop for a car loan.

However, many banks offer auto loans to people with bad credit. Larger national banks can also help you secure an auto loan if you have bad credit.


If you do wind up with a high-interest rate on your car, work on rebuilding your credit score so that you can eventually refinance. Make sure everything is in writing before you agree to terms. Go car shopping without checking out your options A lot of consumers are misinformed about what their credit score is and what options they have for financing based on it.

Do some research before you go car shopping to see what rates you are eligible for. Sign anything without reading and understanding it thoroughly I know you just want to get out of the dealership and on the road, but if you remember only one thing from this article, let it be to read everything carefully before you sign and walk away. Leave the dealership before you finalize your auto financing This is a cruel trick played on eager consumers who just want a vehicle that can drive.

Leave the lot in your old clunker, take the bus, walk home or catch a ride with a friend instead of driving off the lot in a car without approved financing. If you absolutely need a car and you end up with a punitive interest rate, keep in mind that you can refinance in 12 months, or whenever your credit score goes back up.

Save your vehicles.

Talk to your lender to find out what your options are. Pay more than the minimum payment, and pay on time Another way to reduce the time period of your loan is to pay more than the minimum payment each month to reduce the number of overall payments that you make.

An auto loan is an installment loan that contributes to the mix of credit factors in your FICO score. That's the amount you're able to afford.

Looking for a Car Loan?

Check your budget to see what you can really afford to pay and stick to that amount, even if you're approved for a loan with bigger payments. You can shop more realistically when you have a pre-approved loan amount to work with. Talk to your bank or credit union about getting a car loan and to find out the pre-approval process. If you can't get approved with your bank, your car salesman may be able to put you in contact with a lender who caters to car buyers with bad credit.

When you're buying a car with bad credit, you may not be approved for high loan amount, which may mean you have to sacrifice some of the features you want. Leather seats, sunroof, and a premium speaker system may not be options when you're trying to buy a car with bad credit. You're already facing a higher loan payment because of the interest rate. Don't make it bigger by adding features to your car. Before you take on an expensive car loan, check to see if your state has any nonprofit agencies that provide loans or vehicles to low-income consumers.


Check out this November information on car ownership programs by state. Unfortunately, there's not a program in every state. Buy here, pay here car lots offer on-site financing with less stringent credit qualifications sometimes with no credit check , but they also have a reputation for being overpriced, selling poor-quality vehicles, and taking advantage of consumers with bad credit.

Ask for recommendations for a dealership, and check the value of the vehicle and the vehicle history. If you can, take a mechanic friend shopping with you to check out the car to make sure it's in good condition.

The Best Ways to Buy a Car When You Have Bad Credit

Loan documents can be confusing, but your money and your credit are on the line, so it's important to take time to understand the terms of the loan. Make sure the paperwork matches what the dealer verbally agreed to. If you agree to the terms, sign the loan documents before you drive the car off the lot. Some shady dealers let you drive away without signing, then call you back to sign papers with terms that are drastically different from those to which you originally agreed.

One of the ways car salesmen get you into a car is to build up your hopes of trading in next year. Sounds like a great deal, but when you do this, the balance of the old loan is added to the new loan and your payments increase or your repayment period extends. Don't trade unless you improve your credit and can qualify to refinance at a lower interest rate. People with bad credit are the target of countless scams.

Don't fall victim to predatory loans, no matter how much you want to be in a new car.