Getting a loan is already tough enough, but getting an auto loan with bad credit is a herculean task. There are only a handful of lenders who are willing to approve loans for such borrowers. According to Nerdwallet, a bad credit score is usually anything below 630.
Bad credit can limit your options when going for loans from traditional lenders. It can also increase the interest rate you would be charged if you ever get approved for a loan. There are several ways to fix your bad credit score but if you want to go ahead with an auto loan for bad credit, then you should know that there are very few options available.
In this article, we will list several reputable bad credit auto loan companies who are ready to provide the funds for borrowers while attaching a reasonable interest rate and convenient repayment plan.
1. LightStream
A look at LightStream and you would consider it to be the best financer for borrowers with bad credit.
LightStream offers loans to borrowers with a credit score above 660 which is technically not bad credit but fair credit. However, you need to have a higher credit score to improve your chances of getting a loan.
LightStream offers a promise of a 3.99% to 16.99% interest rate for new and used dealer purchase which is considerably low. Unfortunately, this low-interest rate is only for those with good credit and you would see yours rise significantly if you have fair or bad credit.
Loan amounts range from $5,000 to $100,000 with a loan period of 2 – 7 years. LightStream doesn’t charge late payment fees or application fees. Also, it is one of the few auto loan financers that are available in all 50 states.
The company also offers auto loan refinancing and lease buyout which has different interest rates that will heavily depend on your credit score and credit history.
2. Capital One`
Capital One is one of the options for borrowers with bad credit. With a minimum credit score of 500, it should be easy for many borrowers to get approved, however, you would have to deal with the high-interest rates that come with going for bad credit auto loans.
Capital One isn’t for everyone, even if you have a bad credit score that falls within the minimum credit score. Other requirements for qualification include a monthly income $1,500 to $1,800, however, the actual figure will depend on your credit.
Interest rates start as low as 3.79% but this is only for those with excellent credit scores.
Capital One has several restrictions on the kind of vehicle that can be purchased. Before settling for this company ensure you check if its restrictions suit you. On the part of fees, it does not charge any application fees but you might be required to make late payment fees.
3. MyAutoLoan
An APR range as low as 2.7% sounds too good to be true but that is what you get when you apply for a loan through myAutoLoan.
It is important to note that even though the company places a minimum credit score of 500 as a requirement for qualification, you will need to have an excellent credit score to enjoy this low APR. Anything lower than excellent and you will see your APR rise to 27%.
Other requirements for qualification include a minimum monthly income of $1,800. Loan amounts start from $8,000 up to $100,000. MyAutoLoan places several restrictions on the kind of vehicle that be purchased.
For example, you cannot purchase a vehicle with age and mileage above 10 years and 125,000 miles respectively.
Loan period range from 2 – 7 years, however, it’s best to clear up the loan as fast as possible or you will be subjected to high- interest rates during long term loans.
4. CarFinance
Bad credit auto loans couldn’t get any better with CarFinance. With a minimum credit score of 525 and no minimum monthly income requirements, you can get an auto loan from this company without much hassle.
Although Carfinance approves borrowers with a bad credit score, you will find yourself paying high-interest rates if you go for this company. CarFinance offers loans to borrowers whose debt load is up to half their monthly income which is something you rarely see in other lenders.
Interest rates start from 7.99% to 14.99% which is relatively high even if you have a good credit score. Loan amounts start from $7,500 – $45,000 with a loan period of 3 – 6 years.
Carfinance doesn’t charge an application fee but you might be charged for late payment.
When it comes to restrictions, Carfinance has lots of them. You can use its auto loans to purchase only from a franchised dealership and the vehicles must not exceed an age of 8 years and a mileage of 100,000 miles. Also, you cannot purchase exotic cars and heavy-duty trucks with auto loans.
5. Consumers Credit Union
Consumers Credit Union takes the lead as the top auto loan lender with the best interest rates but for those with bad credit, it might be out of their reach.
To apply you must have a credit score above 640, however, if you want to qualify for APR as low as 2.99%, you will need to have a higher credit score. Consumers Credit Union offers APR from 2.99% – 21.99% (borrowers with bad credit scores should expect to pay an APR of 15% and higher).
Other requirements for qualification include a gross income of $6,000 per year, a minimum income of $500 per month and a minimum of $5 per month in your savings account balance.
Loan amounts range from $250 to $500,000 which is payable within a period of 6 months to 84 months. Consumers Credit Union doesn’t place any restrictions on the type, age and mileage of the vehicle to be purchased.
When it comes to fees, the company begins to look less attractive as it charges a membership fee of $5 and a late payment fee of $29 after the 10-day period has elapsed.
Conclusion
Applying for an auto loan with bad credit means you will have to pay high interest rates during the term of the loan.
With a credit score of 700 and above you can qualify for interest rates of 3.99% and lower. This makes it a better option to improve your credit score first before going ahead with your search for bad credit auto loans.
