How To Get A Car With Bad Credit

Ad Disclosure: This article contains references to products from our partners. We may receive compensation if you apply or shop through links in our content. You help support My Millennial Guide by using our links. (read more)

If you have bad credit, you may be wondering how you can get a car loan. Here are a few things to keep in mind when shopping for one.

Want to Make Extra Money Now?
  • Arrived: $100 investment property? Arrived takes the hassle out of real estate investing by enabling you to invest in portions of rental homes for as little as $100 through this link.

If you have bad credit, you may be wondering how you can get a car loan. Here are a few things to keep in mind when shopping for one.

If you have a bad credit score, you might think that it’s impossible to get a car loan. But the truth is, there are plenty of options available for people with bad credit. But, what’s essential is improving your credit score again after facing and overcoming hurdles. You might think it’s very challenging. But some apps make credit building easier. You just need to know where to look.

Steps to Take Before Applying For a Car Loan

If you're among the many people with bad credit, you might feel like getting a car loan is impossible. But it's not! Here are 5 steps to take before applying for a car loan with bad credit:

1. Check Your Credit Report and Score.

This is the first step you should always take when trying to get a loan, regardless of your credit situation. Knowing what’s on your credit report and what your score is will give you a good idea of where you stand and what kind of loan terms you can expect. For instance, in the FICO scoring system, if you only have a slight dip in score but are still above 580, you can still be considered for a car loan. But never be complacent. Always find ways to build your credit. Knowing how to start building credit is also a helpful way to ensure that your credit score is suitable for taking out any loans.

2. Assess your Income and Debt.

In order to get approved for a loan, lenders will want to see that you have the ability to repay it. Take a look at your income and debts to get an idea of what kind of monthly car payment you can afford. It would be best that before shopping for a new car, try to pay off some debt first. It will make the system see your creditworthiness. If they can see that you try your best to repay your debts even with some difficulties, they might grant you a loan.

3. Prove Personal Stability.

If you want to try your hand at traditional lenders, then one of the first things you should look into is your employment history. Next time you start a new job, learn how to start it the right way.

Take note that having a history of jumping from one job to another is a big red flag for most companies. This is because they'll always be questioning whether or not you'll be able to sustain this job and if not, how will you handle your repayments?

Lenders like to see that you have a stable job and place of residence. If you've been at your job for a long time and/or have lived at your current address for several years, this will work in your favor when applying for a car loan with bad credit.

An excellent employment record will give the lenders an overview of your capability and your reputation, both in staying to fulfill a job responsibility and in fulfilling your financial commitments.

4. Residency.

The length of time you've lived in an area or multiple areas is a big deal as well. If you're the type to move addresses every six months then you might not be considered. The less likely you are to stay put, the higher risk for them.

Jumping from one place to the next is a bit shady. Lenders and other financial institutions consider it not normal to establish a place of residence only to leave it in a few months, you’re evading something, and it’s questionable.

5. Consider a Co-Signer.

One of the easiest ways to secure bad credit car financing is by getting a co-signer with good credit to go on your application. Whether it's a parent, partner, or spouse, your chances of securing a car lease will drastically increase.

This is because, on paper, someone else's assets and income are combined with yours during the qualification process.

So if there's someone you trust and trusts you enough to be a co-borrower, you're going to want to talk to them about this. Chances are, you'll even get better interest rates.

If you have bad credit, you may not be approved for a loan on your own. But if you have a close friend or family member with good credit who is willing to co-sign for the loan, you may be able to get approved. Just keep in mind that if you default on the loan, your co-signer will be responsible for repaying it.

6. Consider a Down Payment is Key.

If you have bad credit, one of the best things you can do when applying for a car loan is to put down a large down payment. Lenders like to see that you're invested in the loan and are less likely to default if you've already put some of your own money towards it.

If you’re bent on getting a car. You need to realize that it’s not about to happen with a flick of a finger. You may need to save some cash every month for a down payment to help you qualify for better terms.

7. Know How Much You Can Afford.

It's important to have a budget in mind before shopping around and comparing auto loans. Know how much you can afford to spend on a car payment each month, as well as how much you can afford to put down as a down payment. This will help you narrow down your choices and avoid getting in over your head financially.

8. Build Your Savings.

If you want to increase your approval rate with lenders, make sure that you have some money in your account. To investigate your income and expenses, financing institutions would ask you for (typically) the last 3 months' bank statements.

Now if you only have $300 in savings in your account, that might be taken against you. This is because of the assumption that people who don't have padded savings might not be able to fulfill their repayments during emergencies.

But if you have a few thousand in your account, especially over the last three months, you're more likely to be considered even with poor credit standing or lower-income because you have that safety net in case of emergencies.

How to Shop for Car Loans With Bad Credit

If you have bad credit, you may be wondering how you can get a car loan. Here are a few things to keep in mind when shopping for a car loan with bad credit:

1. Shop Online.

The internet has made it easier than ever to find the best deals on car loans. There are a number of websites that specialize in helping people with bad credit get the financing they need. The average auto loan rate is 5.16% for new cars and 9.34% for used cars, but shop around to get the best deal. You can also refinance later on if you need to by using the best auto refinance lenders.

2. Go To Your Bank.

If you have a bank that you have a good relationship with, it's worth considering getting your loan through them. They may be more willing to work with you than other financial institutions.

3. Consider A Credit Union.

Credit unions are another option to explore when looking for a car loan with bad credit. Because they are non-profit organizations, they may be more willing to work with you and offer lower interest rates.

3. Getting a Loan at the Dealership.

Some dealerships offer in-house financing, which may be an option if you have bad credit. However, it's important to be aware that the interest rates on these loans are often high. You should also be aware of any hidden fees or terms that could make the loan more expensive than it initially appears.

Related: How to Buy From a Dealership and Avoid Car Dealer Tricks

4. Private Sellers.

If you're considering buying a car from a private seller, you may be able to get financing through a personal loan or a short-term loan. This can be a good option if you have bad credit, but it's important to shop around for the best rates.


Like most people, there comes a point in your life when everything seems to be going wrong. Whether it's a divorce, getting laid off from a job, a failed business, or sickness in the family, the sad reality is that most of us aren't prepared for a big crisis.

When plights of life strike, one of the first tangible aspects of life they hit are our financial health. For most people, it's not just about needing to adjust to a smaller budget. It's about suddenly not being able to make a loan to alleviate the financial loss, not being able to get a car for your job, or even not being able to move to a new home or even an apartment — all because of a negatively impacted credit score.

While bad credit history doesn't equate to you having a poor work ethic or being irresponsible with finances, banks and most other traditional lenders would rather not take the risk. The truth of the matter is that the world of financing (for vehicles, personal loans, or otherwise) is still a statistics game.

Statistically, people with bad credit are bigger-risk borrowers. This is why you're having difficulty in getting an auto loan from a dealership or a car loan from the bank.

While people would typically say it's a bad idea to even think about big-ticket purchases like cars or getting into auto loan agreements when your credit standing is poor, sometimes you just need a car to get back up on your feet, or to get to that new job cross-state, or even to (actually) start improving your credit rating.

But when banks and traditional lenders won't let you, the ideas above should have helped you. This article should have helped you answer the question of how to get a car loan with bad credit.


About the author

Brian Meiggs
Hi, I'm Brian Meiggs! A personal finance expert, entrepreneur, and the founder of My Millennial Guide. My drive is to help others unlock the wealth of freedom and pave the path to financial success. With my bachelor's degree in finance, I help millennials follow the smart money in order to increase their earning potential and start building wealth for the future. I write regularly about side hustles, investing, and general personal finance topics aimed to help anyone earn more, pay off debt, and reach financial freedom. I have been quoted in major publications including Business Insider, Yahoo Finance, NASDAQ, Discover, GoDaddy, BiggerPockets, Fox News,, Quick Sprout, Money Geek, MSN Money and many more!