Auto Financing For Bad Credit
Auto Financing For Bad Credit

Auto Financing For Bad Credit

August 22, 2021

It’s quite difficult for those with bad credit to get low interest rates on auto financing for bad credit.

Bad credit indicates a prior problem with repaying one’s debts, which makes lenders less willing to lend since they’re less likely to be repaid. The lender must essentially take on more risk in lending to someone with bad credit. It’s not impossible to get financing with bad credit, however, and it may help people reestablish their credit in the long-run.

Credit Scores

Before applying for a loan, people should review their credit scores and make sure all the information is accurate. The Fair and Accurate Credit Transactions Act allows everyone to check credit score for free. Take advantage of it. If there are errors on the report, make sure to correct them. A score below 680 identifies people as “sub-prime buyers.” Those with scores below 550 will be unlikely to get a loan anywhere. Going forward, it’s wise to try and keep a clean credit history; make payments on-time. It will help in many areas.


It’s important to research the different options. Internet searches let people compare rates across multiple companies. Specifically look for those companies that will lend to people with bad credit. Check the companies’ reputations, as well. People should also check with banks or credit unions to which they belong; they may have options for bad credit auto loans. Credit unions, especially, offer lower rates to their members. But even with bad credit scores, people should not settle for loans they can’t afford or those that are unreasonable. These kinds of auto loans with bad credit can hurt one’s financial position even more and that’s the last thing someone with bad credit needs.

Prepare in Advance

Before applying for a loan, people should know how much they can afford to put down on a car and pay each month. There are free loan calculators online to help determine these amounts. Car buyers often pay interest rates that are too high at the dealership, often 3% too high, which can add up to thousands of dollars. If bad credit car financing through a dealer, make sure to be approved before going to the dealership. It will save a lot of time and hassle.

Differences of Bad Credit Financing

People getting bad credit auto loans will likely pay at least 10% above average interest rates. Lenders see them as riskier prospects, so their rates are higher to compensate for that risk. After a year of making payments on time, people may be able to qualify for refinancing at a lower rate. Their required down payments will likely be higher. Sometimes, people with bad credit may be restricted in the kind of car they want to buy. Some dealerships have special auto financing for people with bad credit deals. Loans may also have much shorter time frames for those with bad credit, which makes monthly payments higher.


Have proof of employment, pay stubs, and income statements ready. Anything that helps people prove that they have stable employment, a regular source of income, or a good banking history can help counteract a bad credit rating.

How to Lower the Interest Rate

One way is to offer to make a bigger cash down payment. This both defrays the total amount of the loan and shows to lenders that the person is less likely to default and thereby lose out on that money. Statistically, loans with larger down payments are paid off more quickly and reliably than those that are not. Another way to reduce one’s rate is to have someone with a good credit history cosign on the loan. Finally, one can put up a savings account or property as collateral on the loan, though this may be an unrealistic option for many people.

Visit us at Stampede Auto for more information!

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