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Auto Loans for People With Bad Credit

In today's lending environment, vehicle financing is becoming more widely available, offering new buying opportunities to those with poor or non-existent credit.

Managing a sub-prime loan from a reputable lender can be a great way to strengthen your credit profile and get a new car. But make sure that you don't overpay for the privilege.

This page:

Explains how to use a sub-prime financing to your advantage

Lists a few things to avoid in these types of loans

Helps you find a fair lender today


Get the lowest auto loan rates:

Capital One Auto Finance offers the lowest auto loan rates in the country, for people with all types of credit ratings.

Apply with Capital One whether you are buying a new or used car, or even if you are buying from an individual. Whatever your choice, you will save thousands.

Auto loans
Click here for your quote


If you have poor or no credit, click here to apply for special financing.


How a well-managed loan can help YOU

Financing a car can be a great way for borrowers with a "checkered past" to improve their credit rating while earning a tangible reward (your new car!).

Making timely monthly payments on this type of account is about the single best way to improve your credit score. And car loans are ideal, because the payments are reasonably sized, but structured towards a payoff (as opposed to credit cards, which seem designed to keep you making minimum payments for decades to come).

Of course, such a loan will only help you if managed wisely.

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How bad is your credit, really? You can find out for free at Consumer Info, with a free one-month subscription to their credit monitoring service. It's a good way to find out where you stand.

Sub-prime borrowers beware!

High risk borrowers should exercise caution before entering into any financial obligation, including a sub-prime auto loan. Here's what to expect and what to watch out for:

Beware of any "special deals" for car buyers with poor or no credit, especially if they're being offered by small-time lenders or questionable dealerships. Unfortunately, taking advantage of poor credit borrowers is far from unheard of in the financing business, and if it sounds too good to be true, it probably is.

"Poor credit deals" from lenders and dealerships alike often involve inflated car prices, a big down payment, and a high interest rate. Also be on the lookout for super-low introductory rates and large rebates. They may come with a large price tag later on.

Stay away from lenders who offer "pre-computed" car loans. The interest on these loans is figured so that whenever you pre-pay (or sell your car), you end up paying more toward interest (and less on the principal) than you should.

Avoid a long or large loan. You'll be paying a high interest rate on an purchase that is rapidly depreciating. This is not smart investing.

Bad credit auto loans are best secured on relatively new (two- of three-year old?) moderately priced used cars. These vehicles deliver the most bang for your buck, and you won't be paying a premium just for credit-repair work (or auto repair-work!).

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One our main criteria when evaluating lenders is a fundamental, company-wide fairness to consumers with lesser credit ratings.

Capital One offer great subprime rates, and they do not try to add extra fees, or pull any financing tricks on those whose credit ratings make traditional financing impossible.

Get a fair shake on your loan

The best way to avoid any of the above-mentioned pitfalls of sub-prime lending is to use direct financing; (that is, a loan set up with an independent lender).

Direct financing is a good bargaining chip for any buyer, because it lets you concentrate totally on the cost of the car, and not on the loan. But it's especially important for a poor credit borrower, because you won't have to take the dealer's only offer if you don't like it.

Direct financing also gives you a guaranteed method of strengthening your credit profile. Some unscrupulous lenders or dealers actually avoid reporting timely payments to credit bureaus, which can keep your credit score artificially low (and your interest rate artificially high.) But if you secure bad credit auto financing through a reputable lender, you'll be guaranteed fair reporting.

Of course, even with the fairest lenders, trying to get financing with lesser credit can be prove to be rocky road. Expect a high interest rate and vehicle restrictions.

Direct lenders will usually require that the vehicle on this type of loan be fairly new (five years or younger), and that it have low mileage (around 60,000 miles). The interest rate may be up to three times what a good credit borrower would earn.

And you'll probably have to buy it from a franchised dealership, rather than from your cousin's neighbor. The bank doesn't want to end up with a bad loan because you ended up with a bad car.

These drawbacks are going to be pretty much unavoidable. Look long and hard at any lender who says they can get around them, and be sure to manage your new debt responsibly. With the right lender, you'll be in the driver's seat in no time.

The right lenders for you

Now that we've spent forever telling you where not to get your loan, we'll spends a little time telling you about a few places we think you should look.

Both of our recommended lenders are committed to helping consumers with poor credit get the car loan they need at a reasonable cost with fair lending practices.

Their online applications are fast, and there is never any commitment on your part. You'll have a credit decision in as few as fifteen minutes and be able to shop at the dealership with cash in hand!

First, try Capital One. They're the nation's largest online auto lender, and they've got reasonable offers on sub-prime loans.

Learn more or apply now.

It may be that your credit score is low enough that Capital One will not be able to finance your car.

If that is the case, you can try AfterBK with confidence. You will be treated fairly by their network of lenders and dealers, and though your interest bill will be higher, you will have your car, and a foot in the door into the world of better credit. What you do afterwards, is up to you.