Skip the auto shop - Our mechanics make house calls

How to Get a Car Loan When You Have Bad Credit

credit score sheet with poor checked off

A few financial missteps can greatly impact your credit score, and it is far more difficult to repair bad credit than it is to gain it.

If you have managed to be branded with a poor credit score, don't despair when it is time to buy a new or gently used car. With the proper preparation and strategy, it is possible for even those with bad credit to get a car loan.

Before you apply for car loans, you need to have an idea of how to appear on paper to lenders and potential creditors. It is crucial that you present yourself in the best light in order to be considered for a loan. For the best results and interest rates in the long term, plan on spending up to six months on preparation, and follow these steps to make a favorable impression:

Method 1 of 1: Buy a car with bad credit

616 low credit score

Step 1: Get your credit report. Order your credit reports from Equifax, Experian, and Transunion. These are the primary credit reporting agencies, and your credit score is ultimately determined by what they have on file about your financial practices.

Bear in mind that the reports can vary between the agencies.

  • Tip: You are entitled to one free report each year; otherwise, you will need to pay a small fee.

Step 2: Try to improve your credit scores. Assess what you can fix on your credit reports, so you can improve your credit score.

Pay off or make payment arrangements on anything you reasonably can handle. If there are any errors, file a dispute. If applicable, consider consolidation for things like student loans.

Step 3: Add your good credit to your reports. Oftentimes, credit reports do not reflect your good repayment history, which doesn't show potential lenders a full idea of your financial habits. It is, however, possible to add your good credit in many cases, although it does cost a little extra.

Step 4: Begin building new credit. Apply for a secured credit card, which is basically a card on which you have already paid the balance.

Also note that just having the card doesn't do anything for your reports; you must actually use it and pay your bills on time for the positive activity to register on your credit score.

water bill with PAID stamp

Step 5: Collect your paperwork. Gather any paperwork that is not part of your public credit record, like utility bills or even notarized affidavits from individuals, to show that you pay bills on time.

Lenders can manually underwrite loans to include records that aren't part of your credit report and will be more motivated to take this step when you are clearly trying to repair your credit and having good organizational skills.

Step 6: Apply for a bank loan. Approach your bank about a loan first. You already have a relationship with the institution, so it is your best bet for a loan approval.

Banks also tend to offer the best interest rates, which will make it easier for you to repay your car loan in the future.

Step 7: Contact your insurance company for a loan. If your bank denies your loan application, then check with your insurance company to see if loan services are part of its array of services.

Like your bank, your insurance company already has you as a customer and will be more likely to approve your loan.

Step 8: Ask the car dealership for a loan. As a last resort, turn to the car dealership that sells the car that you wish to purchase. Dealerships tend to charge higher interest rates, which means you will pay more in the long run, although they approve car loans more freely than banks.

Step 9: Compare all loan options and choose one. Shop around for the best offer and don't automatically sign off on the first loan you are offered.

Read all of the fine print and make sure you understand the terms fully. Weigh your options and be honest with yourself about what you can pay and how long you want to do so.

Make a commitment to a loan only after assessing which loan best fits your needs.

  • Warning: Beware of loans that do not have terms that are final. In such cases, your monthly payments could be increased down the line.
car payment schedule

Step 10: Ensure timely loan repayments. Once you've obtained your loan and have the keys to your new car, make your payments on time to continue repairing your bad credit. That way, the next time you want to make a vehicle purchase, the process will be fast and smooth.

  • Tip: Bear in mind that, after you have made payments on your car loan for a year, you may have the option to refinance at a lower interest rate.

Although the preparation involved to get a car loan with bad credit can be arduous, it is ultimately worth the trouble. Your bad credit doesn't have to last forever, and, after a couple of years of making a concerted effort to repair it, you won't be defined by your past financial mistakes anymore. This will help you to make large purchases such as other cars and even homes in the future.

Once you buy the new car, you have new responsibilities that go beyond just making your monthly payments. You will have maintenance needs and possibly even repairs to deal with in the future.

If you have questions about how to care for your new car or how to maintain it, request the services of an experienced mechanic from YourMechanic. You can also get our mechanics to perform a safety inspection of your new car or a pre-purchase inspection of a used car that you plan to purchase.

The statements expressed above are only for informational purposes and should be independently verified. Please see our terms of service for more details

Skip the repair shop, our top-rated mechanics come to you.

At your home or office

Choose from 600+ repair, maintenance & diagnostic services. Our top-rated mechanics bring all parts & tools to your location.

Fair & transparent pricing

See labor & parts costs upfront, so you can book with confidence.

12-month, 12,000-mile warranty

Our services are backed by a 12-month, 12,000-mile warranty for your peace of mind.

Get A Quote

Ask a Mechanic
(100% Free)

Have a car question? Get free advice from our top-rated mechanics.

Ask A Mechanic
Over 10,000 questions answered!

Need Help With Your Car?

Our certified mobile mechanics make house calls in over 2,000 U.S. cities. Fast, free online quotes for your car repair.


Post a question and get free advice from our certified mechanics.


More related articles

How to Find the Keyless Code on a Ford Explorer or Mercury Mountaineer
Many Ford Explorers and Mercury Mountaineers were manufactured with an option known as the Ford keyless entry keypad. Some models refer to it as SecuriCode as well. It...
P0240 OBD-II Trouble Code: Turbocharger Boost Sensor B Circuit Range/Performance
P0240 code definition Turbocharger Boost Sensor B Circuit Range/Performance What the P0240 code means P0240 is an OBD-II generic code triggered when the Engine Control Module (ECM) detects the intake boost...
How to Transfer a Car Title in Idaho
In order to prove ownership of a car, you must have the title. However, when a car is sold, given away or inherited, the title needs...

Related questions

Q: Auto recall notices to get car checked but never did can I stil?

If you have a recall that was never completed, you can always go back and get it done at any time. It is preferred to get it done as soon as possible however it can always be done at any...

Q: Advice on buying a car

I'd recommend getting a Tundra if you want a pickup truck, but if you want speed get a Mach One. You mentioned that it has 9,000 miles on it, you'll want to make sure it is not 9,000 miles at...

Q: After parked overnight, car loses all electrical power

Hello. This may sound strange, but were you parked under a street light when the battery died? I have experienced faulty florescent lights putting out RF signals (the signals that your remote fob use) that do not let the car...