Having a low credit score can be a barrier to lots of things that are essential to survival. It can keep you from renting an apartment, getting a car, or taking out a student loan. 

Having a low credit score is also often not your fault. You might just be younger and have a short credit history, or you might be dealing with medical bills from an unexpected accident.

Or, like 25% of Americans, you might have struggled to pay bills due to COVID-19. Whatever the cause of your low credit score, we’ll tell you how to get an auto loan even with that score weighing you down. 

The sooner you have a car at your disposal, the easier it will be for you to get back to work, pad your savings, and pay off debt. Keep reading to find out all you need to know about bad credit and car loans.

How Credit Affects Your Loans?

First, let’s break down what your credit score means to lenders. They use your credit score, a number between 300 and 850, to determine how likely they think you are to pay back a loan.

Generally, 850 is considered a perfect credit score. Most people’s credit scores range from 500 to 800. The average credit score in the U.S. is currently 711.

If your credit score is lower than that, you can still get most types of loans.

If you have made late payments on your credit card or any other unpaid debt, you should check your credit score before attempting to take out a loan. 

Normally, you’re only able to check your credit score for free once a year. However, due to the COVID-19 pandemic, some credit reporting agencies have started giving out free credit checks as often as once a week.

Once you know your credit score, you can better plan the steps you must take to get a loan.

If your credit is on the lower side, you may have to pay higher interest rates on your loans. 

How an Auto Loan Works?

All car loans are made up of interest rates, comparison rates, repayments, and fees. Let’s break down what each one of these things means. 

Interest Rates

Car finance interest rates are extra charges that you have to pay the lender for letting you borrow money. This will be a percentage of your loan and will be expressed in an annual amount. 

Your credit score comes into play here. People with higher credit scores will typically have lower interest rates, while those with lower scores may have to pay a bit more.

Comparison Rates

The law requires lenders to disclose a comparison rate when giving out car loans. A comparison rate will show you the total cost of a car loan, factoring in the interest rate and other fees. 

Your comparison rate will help you figure out how to plan for your loan payments, which is especially important if you have bad credit for loans. 


You and your lender will figure out how often you need to repay your auto loan. Usually, this will take between 36 and 60 months. 

If you are struggling financially, the best auto loans will be charitable about how often you need to make payments. 

You’ll make your payments weekly, biweekly, or monthly. If you want, you may also be able to make smaller payments at first and pay a larger lump sum at the end of your loan. 


Car loans are chock-full of extra fees. These include application fees, ongoing fees, brokerage fees, penalty fees, and early repayment fees. 

The application fee is decided by your lender and will be one flat amount added to your loan. Your lender can also choose to charge your ongoing monthly fees on top of interest, which they may calculate based on your credit score. 

If you make repayments late, you may be charged a penalty fee. If you make repayments early, however, you also may be charged extra.

Improve Your Credit Before Borrowing 

The best way to pay as few additional loan fees as possible is to have decent credit. If your credit score is low, you should consider taking some time to improve your score before asking for a car loan. 

You can improve your credit score by repaying your existing debts. It will take about six months for these repayments to reflect in your credit score. 

If you’ve paid off your debts but your credit score is still on the lower side, you can build up good credit by opening a secured credit card. 

A secured credit card is a credit card that you load money onto ahead of time. That way, you don’t have to worry about spending more than you can pay back. 

Secured credit cards are great options for people who are wary of credit cards, young people who don’t have an existing credit history, or people whose low credit score makes it difficult for them to apply for other lines of credit.

Get a Co-Signer

If you can’t wait to take out an auto loan, you should consider getting a co-signer to lessen the burden of your low credit score. A co-signer can be a friend, family member, spouse, or anyone else who is willing to help you out.

When someone co-signs your loan application, the lender will consider their credit score when they’re deciding how risky your loan is.

This means that your co-signer is legally responsible if you default on your loan. Make sure you talk to your co-signer and come up with a plan in case this happens. 

It’s important to find a co-signer who has a high credit score and is someone you can feel comfortable talking to about your finances. It’s best to be honest if you’re struggling so that they can help you.

Save Appropriately

Before you take out a loan, you should have some money set aside. This can be used for upfront costs and emergencies. 

You will probably need to pay a down payment on your car, so you should have money set aside for that. The bigger your down payment is, the less money you’ll need to borrow.

Paying a down payment can also lessen the amount of interest you need to pay, even if you have a bad credit score. Paying a sizeable down payment shows your lenders that you can wisely manage your money. 

You will also want to have extra money set aside for repayments, to avoid both penalty fees and damage to your credit score. 

You’ve probably heard the advice that you should always keep three months’ rent in your savings account. To be safe, you can apply this same advice to loan repayments.

Always make sure you have a couple of payments set aside in case an unforeseen emergency affects your income. 

Buy a Used Vehicle

Used car sales are over twice as common in the U.S. as new car sales. Used cars are cheaper both upfront and down the line as far payments go. 

Since used cars cost less in total, you’ll be able to take out a smaller loan to pay for one. That means your interest and monthly fees will be lower too. 

The average lifespan of a car is 11 years, so keep that in mind when buying a used vehicle. You want to be able to finish paying your auto loan before you need to replace your car. 

Used cars will cost you less in insurance since they’re less valuable than new cars. They will also cost you less in repairs because they don’t have cutting-edge technology in them that might trouble a mechanic. 

By paying less for the upkeep of your car, you’ll be more likely to have enough for your loan repayments. 

Never Miss a Payment

When you take out an auto loan despite your bad credit, you’re getting more than just a car; you’re getting an opportunity to set yourself up for future success. This is your chance to rebuild that credit score.

Paying back a large loan like an auto loan is the fastest way to improve your credit. The more money you borrow and repay, the more your credit score will be affected. 

The next time you need to take out a loan for a car, a house, or any other large expense, you won’t have to deal with the looming stress of bad credit. 

Find the Right Lender Today

Now that you know all about getting an auto loan with bad credit, it’s time to find the lender. Compare fees and interest rates, and find the best car loans for you today. 

As long as you follow our advice, you’ll be on the road and saving money in no time. 

For more saving tips, feel free to check out the rest of our blog.

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