Can you get The car loan with a great bad credit score?

A bad credit score. Most adults dread it. Yet, many of us find ourselves with one! According to a report published by, one out of every three Americans has a bad credit score.

What number exactly classifies as one? Well, as per most experts, any score below the threshold of 600 is considered to be a poor credit rating.

Are you aware of your credit score? If not, you should be! While over 54 percent of Americans don’t check their credit score, this mere number decides whether you get financing for the various necessities of your life. This includes your ability to buy a car.

Does this mean you can’t get a car loan with a bad credit score? Not exactly!

How does a bad credit score affect auto loans?

Here is how a bad credit rating can affect your ability to secure a car loan.

1. Lenders won’t choose you over other potential borrowers

The lower your credit score, the lower is the chance that lenders will be willing to trust you with their money. This is because a credit rating is evidence of your trustworthiness and your ability to pay back on time.

According to the famous credit-reporting agency Experian, out of the total loans issued in 2018’s third quarter, only 38 percent were to those who had credit scores lower than 660. On average, you need at least 717 for an auto loan in today’s time.

This doesn’t mean that you have no chance of getting your car loan approved by potential lenders. It just means that you will have to rely on a smaller pool of lenders, and hence won’t have a lot of ability to negotiate.

2. You will have to pay more

No benefit or convenience ever comes without a cost. That is true for loans as well. No one would be willing to give you money if they don’t get anything in return. This is where the concept of interest rates come in.

In short, when you opt for car loans for financing your purchase, in the long-run, you end up paying more than the market value of the car. However, how much more you will have to pay depends on your credit score.

The lower your score, the more “high-risk” you are considered. And to offset this risk, the lender will ask for a significantly higher interest rate to protect themselves.

In 2018, people with scores less than 660 got loans at an average interest rate range of 7 to 14 percent for new car loans and between 10 to 18 percent for used cars.

Compared to those with excellent credit ratings, these interest rates are much higher. To put things into perspective, imagine this. Anyone with a score between 780 and 850 will be charged an interest rate between 3.68 to 4.56 percent for new vehicles and between 4.34 to 5.97 percent for used ones.

If you are new to the world of loans, you might think that a few percentage points might not matter much. But cars are worth thousands of bucks! So, every seemingly insignificant difference adds up to a huge difference in monetary terms.

What can make it better?

Now that you know that a bad credit rating can affect, if not completely eliminate, your chances to secure a car loan, the next step is to come up with an action plan. Here is what you can do.

1. Check your score

Before you begin looking for the best auto loan, first assess where you stand currently. Rather than shooting an arrow in the dark, go in with proper research. Find out your credit score. 

Let’s say your credit score is extremely bad, here are steps you can take to improve it:

  • Avoid late payments of current installments of debt
  • Pay all your bills on time
  • Don’t apply for multiple loans within a short period of time

Check your various credit reports and see which negative items show up. If you find any error, make sure to resolve them before your lender reviews your report. 

2. Apply for a smaller loan by saving up for down payment

A great way to improve your credit score is by applying for a lesser amount of loans. The lower your debt is, the higher is the chance that you will be able to pay it off. While this improvement in the credit score will come after you have taken your car loan, overall, this will help improve your standing.

So, how do you apply for a smaller loan when the vehicle you want is worth much more? Simple! By paying up the down payment amount on your own. A great way to do so is by trading your used cars for cash or for a discount on the price of a new vehicle. 

3. Compare rates across lenders

Never settle for the first lender that you find. Instead, do your research. Different lenders will offer you varying rates. Whenever you find a suitable lender, gauge both the short-term and long-term payments you will have to make. Unless you are comfortable with the investment through and through, avoid it.

4. Refinance for a better interest rate

Let’s say you end up improving your credit score by being punctual about all your payments. The next step should be to reduce the interest rates you pay on existing loans.

A great way to do so is by refinancing the current debt. The chances are that due to your poor rating, you were able to get your car loan at a high-interest rate. Once your rating improves, reapply for a new loan and use it to pay the old one in full amount. 

The interest you now have to pay at the amount will be significantly lower than the original rate. 


Yes, you can get a car loan with a bad credit score. But, to save yourself from all the hassle and challenges, try to improve your credit rating instead!