Bad Credit Auto Loans

Sometimes life’s expenses loom up all at once and sometimes we simply develop bad spending habits. But neither of these scenarios eliminate our need for a car.  The good news is that even if you have bad credit, you can still get an auto loan.

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Anatomy of a Bad Credit Car Loan

Many lenders offer auto loans to borrowers with bad credit.  In some ways the loans are quite similar to any other auto loan.  Here are a few similarities:

  • The structure of the loans will be the same.  You will supply a down payment, make monthly payments with interest, and will have a set loan length (also known as amortization).
  • You can buy almost any type of vehicle (SUV, Sedan, Motorcycle, etc.).

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There are also a few differences:

  • You may need a co-signer.  A co-signer is a family member or close friend who would be considered a desirable borrower (e.g., has good credit, decent income, etc.) and who will sign your loan statement with you.  If you miss payments, you will both be held responsible.
  • Your interest rate will probably be higher because you are considered a higher risk borrower.
  • You may have to forego the traditional 13-15% allotment of your monthly net earnings.  While this figure works well for people with little to no debt, you will have to reconsider if you have a great deal of debt.

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Car Loans Improve Your Credit

If you can handle the added monthly bill, it may be a good idea to get a car loan while you have bad credit.  If you can pay your monthly payments in full and on time, your credit score will improve.  Just make sure that you get a loan from an agency that reports to the credit bureau, otherwise your improved financial habits will go unnoticed.

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* Auto Loan Center is not an auto loan lender or broker, but provides information about auto loan products and lenders. Not all products and services are available in all states.

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Current Rates


36 month new car:
60 month new car:
48 month used car:


Rates vary depending on your credit and the lender

Updated: January 2014

Source: Uehara Index