Best Car Loans for Bad Credit in 2026
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Adheres to Bad credit doesn't mean you can't get a car loan. Subprime borrowers with scores between 501 and 600 pay an average APR of 13.18% on new cars and 18.8...
- Compare car loan lenders that accept credit scores below 600.
- Check current APR rates and get prequalified online.
- Find lenders offering $0 down payment options.
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Getting a car loan with bad credit is harder than it used to be, but it's far from impossible. About 16% of all auto loans in the U.S. go to subprime borrowers, and dozens of lenders now specialize in this space.
The trade-off is cost. Subprime borrowers (credit scores 501 to 600) pay an average APR of 13.18% on new cars and 18.86% on used, compared to 5.18% and 6.82% for borrowers above 781. That gap adds up to thousands of dollars over the life of a loan.
This guide breaks down what to expect, which lenders work with bad credit, and how to get the lowest rate your situation allows.
What Is a Bad Credit Car Loan?
A bad credit car loan is auto financing for borrowers with FICO scores below 670, often below 600. The loan itself works like any other car loan: you borrow a fixed amount, pay it back in monthly installments over 24 to 84 months, and the car serves as collateral. This makes it a type of secured loan.
What changes with bad credit is the price. Lenders charge higher interest rates to offset the risk of lending to someone with a lower score. You may also face stricter terms, like shorter loan durations, higher down payment requirements, or caps on the vehicle's age and mileage.
Average Car Loan Interest Rates by Credit Score
Current average APR rates vary significantly based on your credit tier. Here's what subprime and deep subprime borrowers are paying as of early 2026:
Deep subprime (300 to 500): Average APR of 15.85%.
Subprime (501 to 600): Average APR of 13.18% for new cars, 18.86% for used.
Near prime (601 to 660): Average APR of 9.83% for new cars, 13.74% for used.
To put this in dollar terms: on a $20,000 used car loan at 18.86% over 60 months, you'd pay roughly $11,260 in total interest. The same loan at 6.82% (superprime rate) would cost about $3,670 in interest. That's a $7,590 difference.
These are averages. Your actual rate depends on the lender, your specific score, income, debt-to-income ratio, and the vehicle you're buying.
| Credit Tier | Score Range | Avg APR (New) | Avg APR (Used) |
|---|---|---|---|
| Super prime | 781+ | 5.18% | 6.82% |
| Prime | 661-780 | 6.98% | 9.54% |
| Near prime | 601-660 | 9.83% | 13.74% |
| Subprime | 501-600 | 13.18% | 18.86% |
| Deep subprime | 300-500 | 15.85% | ~20%+ |
Best Lenders for Bad Credit Car Loans in 2026
Not every lender works with bad credit, and the ones that do differ widely in rates, credit score minimums, and how they handle the application process. Here are lenders worth looking at if your score is below 600. You can also explore general bad credit loan options beyond auto loans.
Capital One Auto Finance
- Minimum credit score: 500
- Loan amounts: $4,000 to $100,000
- Rates from: 5.12% APR
Capital One's Auto Navigator tool lets you prequalify and see real rates without a hard credit pull. Browse vehicles at participating dealerships and apply financing directly. Works with both new and used cars. Expect significantly higher rates with a sub-600 score.
Carvana
- Minimum credit score: None
- Rates: 7.90% to 27.90% APR
- Prequalification: Soft pull, about 2 minutes
Carvana is an online car dealer that handles both the vehicle purchase and the financing. You get a 7-day return policy as a trial period. The convenience factor is high, but rates for bad credit borrowers tend to land in the upper range.
Westlake Financial
- Minimum credit score: None
- Rates from: 4.99% APR
- Terms: Up to 72 months, down payment as low as $0
Westlake Financial works through a network of car dealerships with programs segmented by credit tier: Standard (0 to 599), Gold (600 to 699), Platinum (700 to 749), and Titanium (750+). One of the more accessible options for deep subprime borrowers.
Autopay
- Minimum credit score: 550 to 580 (varies by partner lender)
- Rates: 4.67% to 23.80% APR
- Loan amounts: $2,500 to $100,000, terms 2 to 7 years
Autopay is an online marketplace that matches you with multiple lenders and credit unions. Prequalification uses a soft credit pull. Also strong for refinancing existing auto loans if you want to lower your rate after improving your credit.
Consumers Credit Union
- Minimum credit score: Varies by program
- Loan types: New, used, and refinance
- Membership: Open to anyone (join online)
As a nonprofit credit union, Consumers Credit Union typically offers lower rates than banks or online lenders for subprime borrowers. Membership is open to anyone, and they have specific programs for borrowers with less-than-perfect credit. Credit unions in general report to all three bureaus, helping you rebuild your score with on-time payments.
Types of Lenders for Bad Credit Car Loans
Where you apply matters almost as much as your credit score. Each lender type has distinct pros and cons for bad credit borrowers.
Credit unions often offer the lowest rates for subprime borrowers because they're nonprofit organizations. Consumers Credit Union offers nationwide membership and competitive auto loan rates.
Online lenders and marketplaces (like Autopay or Upstart) let you compare multiple offers in one application. Fast process, easy comparison.
Online car dealers (like Carvana) handle both the car and the financing in one place. Convenient, but you lose the ability to negotiate price or shop financing separately.
Traditional dealerships often have relationships with subprime lenders and may be more flexible on approval. However, dealer-arranged financing tends to carry higher rates because the dealer adds a markup.
Banks like Bank of America and Capital One offer prequalification tools that let you check rates before visiting a dealer. If you have an existing banking relationship, your bank may offer better terms.
How to Get Approved for a Car Loan with Bad Credit
Your credit score determines the starting point, but these steps can move the needle on your approval odds and the rate you receive.
Get prequalified with multiple lenders
Prequalification uses a soft credit pull that won't affect your score. Capital One Auto Navigator, Autopay, and Carvana all offer this. Check at least 3 lenders to compare rates. The spread between offers can be 5 to 10 percentage points for the same borrower.
Save for a larger down payment
Aim for at least 10% to 20% of the vehicle price. A larger down payment lowers the loan amount, which reduces risk for the lender and often results in a lower rate. It also helps you avoid being underwater on the loan (owing more than the car is worth).
Consider a cosigner
A cosigner with good credit can significantly improve your approval chances and lower your interest rate. The cosigner takes on equal responsibility for the loan, so make sure both parties understand the commitment. Late payments affect the cosigner's credit too.
Look at used cars in the $10,000 to $20,000 range
Smaller loan amounts are easier to get approved for and mean lower monthly payments. A reliable 2 to 4 year old used car often represents the best value. Avoid the temptation of a new car when your credit is still recovering.
Check your credit report for errors
About 1 in 5 consumers have errors on their credit reports, according to the FTC. Dispute any inaccuracies with the three bureaus (Equifax, Experian, TransUnion) before applying. Removing an incorrect late payment or collection can boost your score by 20 to 50 points.
Keep rate shopping within a 14-day window
FICO groups all auto loan inquiries within a 14-day period as a single hard pull. This means you can apply to multiple lenders within two weeks without additional damage to your score. Use this window to compare dealer financing, bank rates, and credit union offers.
New vs. Used Cars: What Makes Sense with Bad Credit?
Subprime borrowers pay less in interest on new cars than used cars, but new cars cost more upfront and depreciate faster. Here's how they compare.
| Factor | New Car | Used Car (2-5 years old) |
|---|---|---|
| Purchase Price | Higher | Lower (biggest depreciation already happened) |
| Interest Rates | Lower (by 4-6 percentage points at same credit tier) | Higher |
| Depreciation | Loses 20-30% value in first 2 years | Most depreciation already absorbed |
| Incentives | Manufacturer financing deals may be available | Rarely available |
| Negative Equity Risk | High (especially with low down payment) | Lower |
| Best Option for Bad Credit | Only if manufacturer incentives offset the higher price | Certified pre-owned, 2-3 years old, low mileage |
Regardless of which you choose, run the numbers. A lower purchase price with a higher rate can still result in lower total cost than a higher purchase price with a slightly better rate.
How a Car Loan Affects Your Credit Score
A car loan is one of the fastest ways to rebuild credit, provided you make every payment on time.
Payment history makes up 35% of your FICO score. Twelve consecutive on-time payments can start moving your score upward. Many subprime borrowers who maintain perfect payment histories see credit score increases of 50 to 100 points within the first 18 to 24 months. Learn more about how a car loan can raise your credit score.
Credit mix accounts for 10% of your score. If you only have credit cards, adding an installment loan like a car loan improves your credit mix.
Before signing, confirm that the lender reports to all three major credit bureaus (Equifax, Experian, TransUnion). If they don't report, your on-time payments won't help rebuild your credit. Also ask about options to refinance later. If your score improves after 12 to 18 months of on-time payments, you may qualify for a significantly lower rate through refinancing.
Red Flags to Watch Out For
Bad credit borrowers are frequent targets of predatory lending. Knowing the warning signs can save you thousands and protect you from scams.
Pressure to sign immediately. Legitimate lenders give you time to review terms. Any dealer or lender using phrases like "this deal expires today" is a red flag.
Focus only on monthly payments. A low monthly payment sounds great until you realize the loan stretches to 84 months and you're paying $15,000 in interest. Always look at the total cost of the loan, not just the monthly number.
Yo-yo financing. The dealer lets you drive off, then calls days later saying financing fell through and you need to sign new terms at a higher rate. Get final approval in writing before taking the car.
Mandatory add-ons for approval. Some dealers make loan approval contingent on buying GAP insurance, extended warranties, or paint protection. These should always be optional.
Upfront fees via wire transfer or gift cards. No legitimate auto lender asks for payment before approving your loan. Fees are deducted from the loan amount, not paid separately.
No written loan agreement. Every term (rate, duration, fees, penalties) should be in writing before you sign. If the lender is vague about terms, walk away.
Report Predatory Lending
If you suspect predatory lending, file a complaint with the Consumer Financial Protection Bureau (CFPB) or your state attorney general's office. The CFPB has enforcement authority over auto lenders and has returned billions to consumers through enforcement actions.
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Frequently Asked Questions About Bad Credit Car Loans
Can I get a car loan with a credit score below 500?
Yes, several lenders work with deep subprime borrowers (scores 300 to 500). Credit Acceptance, Westlake Financial, and Carvana all have no minimum credit score requirement. Expect APRs above 15%, and you'll likely need a larger down payment or a cosigner to improve your terms.
What is the average interest rate for a bad credit car loan?
Subprime borrowers (scores 501 to 600) pay an average of 13.18% APR on new cars and 18.86% on used cars, according to Experian data. Deep subprime borrowers (below 500) average around 15.85% APR. Your actual rate depends on the lender, your income, and the vehicle.
What car company has the best financing for bad credit?
Capital One Auto Finance is widely considered one of the best options because it offers prequalification with no credit impact and accepts scores as low as 500. For very bad credit, Westlake Financial and Credit Acceptance are more accessible. Credit unions also tend to offer better rates than banks for subprime borrowers - Consumers Credit Union offers competitive auto loan rates with nationwide membership. Upstart is another option worth considering, as their AI-powered model looks beyond just your credit score.
Is it better to get financing from a dealership or a bank?
For bad credit borrowers, getting prequalified with a bank or credit union first gives you a baseline rate to compare against dealer financing. Dealers often mark up the rate from their lending partners. Having an outside offer creates leverage to negotiate better terms at the dealership.
How long should my car loan term be?
Aim for 48 to 60 months. Longer terms (72 to 84 months) reduce your monthly payment but dramatically increase total interest paid. On a $20,000 loan at 14% APR, extending from 60 to 84 months adds about $3,200 in interest. The shortest term you can afford is usually the best financial choice.
Can I refinance my bad credit car loan later?
Yes, and you should plan on it. If you make 12 to 18 months of on-time payments, your credit score should improve enough to qualify for a lower rate. Lenders like Autopay specialize in auto refinancing, and Caribou searches across 40+ lenders to find your best refinance rate. Even dropping your rate by 3 to 4 percentage points can save thousands over the remaining loan term.
What is the easiest way to get a car with bad credit?
Start by getting prequalified with 2 to 3 lenders using soft credit pulls (Capital One Auto Navigator, Autopay, Carvana). This shows you what rates you qualify for without hurting your score. Save for a down payment of at least 10%, focus on used cars in the $10,000 to $20,000 range, and consider a cosigner if your score is below 500.