Best bad credit auto loan rates for February 2025

A closer look at our top picks for bad credit auto loans

What are bad credit auto loans?

Auto loans are secured loans that use the car you buy as collateral. A bad credit auto loan is essentially the same as a normal auto loan, but it usually has a more expansive acceptance criteria at the trade off of higher rates and fees.  

You are typically asked to pay a fixed interest rate and make monthly payments for 24 to 84 months, at which point your car will be paid off. Many dealerships offer their own financing, but you can also find auto loans at national banks, local credit unions and online lenders. 

While you are unlikely to qualify for the lowest auto loan rates, you should still take the time to apply for preapproval before you visit a dealership. This will help you get the most competitive offer from lenders that offer car loans for bad credit. 

Auto loan rates by credit score

This answer varies by specific lender, but the better your score is, the better your rates and terms will be. If you have low or no credit, you may still qualify for a loan but should expect a higher average auto loan rate.

In the third quarter of 2024, drivers with scores of 500 or lower received an average rate of 15.43 percent for new and 21.55 percent for used cars, according to Experian. However, these borrowers accounted for a small portion of approved loans. Those with scores between 500 and 600 fared better, with rates of 13 percent and 18.95 percent for new and used cars, repsectively.

How to apply for car loans with bad credit

It is possible to get a car loan with bad credit, although having bad credit will raise the rates you're offered. If you are having trouble getting approved or finding acceptable rates, follow these steps:

1. Check your credit score: At least 30 days before you plan on applying, check your credit report and your credit score. Dispute any inaccurate information to get it removed and boost your score.
2. Reduce existing debt: Before applying for an auto loan, pay down as much debt as you can and avoid opening new accounts.
3. Get a cosigner: A cosigner with good credit will take on some responsibility for your loan if you default, but they can also help you qualify for the loan and potentially for a lower rate.
4. Make a large down payment: A larger down payment will lower your monthly payment, and it could also help you qualify for better rates because it reduces the amount you have to finance.
5. Apply for preapproval: Auto loan preapproval allows you to visit a dealership like a cash buyer. You can start your search on Bankrate to see what rates you could qualify for.

What to consider when refinancing your car with bad credit

If you are applying to refinance loan with poor credit, keep your loan amount, as well as the mileage and age of your vehicle, in mind. 

• Vehicle mileage: Lenders will only refinance vehicles between 80,000 miles and 120,000 miles, though most will only accept vehicles with less than 100,000 miles.
• Age of vehicle: Many lenders will not refinance a vehicle over 10 years old, but there may be exceptions for antique or collector vehicles.
• Loan amount: You will be required to have a minimum amount left on your loan, but the exact balance depends on your lender.

Pros and cons of car loans for bad credit