Finding a fantastic auto loan for your specific financial capability is often a challenge. If you choose the wrong auto loan, you may end up accumulating bad debt. Additionally, getting a reasonable interest rate will save you a significant amount in the long run.
Most people assume that it’s challenging to find auto loans with bad credit. On the contrary, there are multiple auto loans available, even with a poor credit score. Since an auto loan is a secured loan, the vehicle becomes collateral in case you default. For this reason, most lenders opt to overlook your history with bad credit.
Since taking out an auto loan is a crucial financial decision, comparing several options is essential. To help you make this choice, here is a list of 15 fantastic auto loans you can get with good or bad credit.
Summary of Auto Loans for Good and Bad Credit
|Auto Loan Provider||Best For||Minimum Credit Score||Loan Amount||Lowest APR Offered|
|myAutoloan||Best for Auto loan refinancing||575||$5,000 minimum||2.49% – 29.40%|
|Tresl||Best for Auto loan refinancing||500||$5,000 – $100,000||1.99 – 17.99%|
|Auto Credit||Best for Bad Credit||No minimum
|It varies depending on the lender||It varies depending on the lender|
|Carvana||Best for Online purchase and financing||No minimum
|$1,000 – $85,000||3.90 – 27.90%|
|Capital One||Best for Auto purchase||No minimum
|$4,000 – $75,000||2.99 – 24.99%|
|RateGenius||Best for Auto loan refinancing||550||$10,000 – $90,000||2.39%|
|Autopay||Best for Auto loan refinancing||630||$2,500 – $100,000||1.99% – 17.99%|
|Consumers||Best for Auto purchase||620||$5,000 – $75,000||2.24% – 21.24%|
|RefiJet||Best for Auto loan refinancing||500||$7,500 – $150,000||2.45% – 17.99%|
|Best for Auto purchase||610||$500 – $100,000||0.99%|
|Auto Approve||Best for Auto loan refinancing||580||$5,000 to $85,000||2.25%|
|LightStream||Best for Auto purchase||660||$5,000 – $100,000||2.99 – 9.99%|
|Vroom||Best for Online purchase and financing||No minimum
|$5,000 – $100,000||2.49%|
|Ally Clearlane||Best for Auto loan refinancing||520||$10,000 – $80,000||3.74 – 16.49%|
|iLendingDirect||Best for bad credit auto refinancing||560||$7,500 minimum||1.99%|
Auto Loan Refinancing
Auto loan refinancing refers to paying off an existing loan with a new one from another lender. The new car remains as collateral for the new car loan, the same case as the existing loan.
Refinancing an auto loan is a great way to save money since the new loan often has lower interest rates. Additionally, you can increase the loan term to minimize the monthly payments depending on your financial health. The only downside to a longer period is the increased total interest over the loan’s duration.
Should you choose to refinance your loan, it’s possible to add or remove a co-signer. If the existing co-signer is unwilling to continue as your guarantor, you can eliminate them by taking another loan from another lender.
You can also refinance your loan if you get another option with lower rates and better features such as application charges, late fees, and insurance.
Pros & Cons of Refinancing Auto Loans
|Reduced interest rates||More total interest|
|Lower monthly payments||Additional lender fees|
|Better cash flow||Risk of unmanageable debt|
|Negative equity, meaning your outstanding loan is more than the car’s value.|
What to Know Before You Apply for an Auto Loan
When applying for an auto loan, keep in mind that you’re getting both the car and a new loan. To get the most suitable auto loan, ensure that you:
Establish Your Budget
Determining your budget before applying for an auto loan helps you know how much you can afford to pay monthly. For instance, loans with longer terms have lower monthly payments but higher total interest. Shorter periods have higher monthly payments and lower total interest.
As you set your budget, consider the overall cost of the new car, including the dealer’s price, total interest on the loan, and the total number of payments you’ll make. You’ll have an easier time comparing various lenders.
Know Your Credit Score and Credit Report
Before applying for an auto loan, it’s essential to know your credit score and credit report. If your credit score is good, you’ll have a higher chance of getting the loan at a low-interest rate and on better terms.
For instance, the auto loan interest rate with a 725 credit score is about 4.52%. With a 712 credit score, auto loan interest rates increase to 4.68% and above. Boosting your score results in even lower rates
If your credit history is poor, keep in mind that the loans you qualify for will have higher interest rates. You can choose to go ahead with the loan application or wait to apply when your credit score improves.
With your budget and credit score at hand, it’s time to start comparing quotes and rates from different lenders. For example, the auto loan interest rate with an 825 credit score is 2- 4%. Look at various credit unions, banks, dealerships, and online lenders to see who has the lowest rates for the same amount.
Get Preapproval for the Loan
Before a lender offers you the preapproval letter, they check your credit score and report. The letter does not guarantee that you’ll get the loan, and it doesn’t mean you now have the loan. You also don’t have to take out the total amount if you get a car at a lower price.
Once you get a good quote, you can start the preapproval application. The letter can serve as your leverage during negotiations, as it shows the exact amount you can get.
Frequently Asked Questions
Does Refinancing an Auto Loan Affect Your Credit Score?
Refinancing is taking on a new loan. Like any other loan, it will cause your credit score to drop slightly. Since you’re replacing an existing loan with a new one of a similar amount, the effect will be minimal. If you make timely consecutive payments, your credit score goes back up.
What’s the Lowest Credit Score Required for an Auto Loan?
Your credit score is a crucial factor when determining if you qualify for any loan. However, auto loans have no minimum credit scores since the car acts as collateral.
Which Is Better, Getting an Auto Loan from a Bank or a Dealership?
Banks or credit unions often have higher interest rates compared to dealerships. Generally, credit unions have better rates than prominent banks. Dealerships partner with various lenders, so they’re able to offer you the best deals available.
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