You can still buy a dependable car even with bad credit. Online lenders, member-owned credit unions, and large dealer networks now offer various options for bad credit borrowers. Our ultimate guide will help you better understand the potential rates, explore reliable loan sources, and find out how you can increase your chances of being approved with less-than-perfect scores.
Why Bad Credit No Longer Blocks Car Ownership in 2025
Car demand rose again after supply problems improved, but lenders didn’t make it harder to get loans as experts expected. The Dealertrack Credit Availability Index increased for ten months and has now reached its highest level since late 2022. Easier loan requirements means a buyer with a sub-600 score is more likely to get approved with a lower down payment than three years ago. Competition increases the chances of getting approved.
What Is Considered Bad Credit?
Most banks start with the FICO® scoring model, which takes into account payment history, amounts owed, length of credit history, new credit, and credit mix. After that, lenders also check your debt-to-income ratio and even how you’ve handled past accounts with their bank to round out the decision.
The 2025 Rate for Low Scores
Here are interest rate ranges for different FICO scores или как-то так, все эти think if it:
- Drivers with FICO scores above 780 often sign near 5% for sixty-month new-car deals.
- Borrowers with ratings between 661 and 780 usually land within the 7-9%.
- Applicants with scores of 580 to 660 usually pay anywhere from 9-14% on a new model and 11-18% on a used one.
- People with FICO ratings below 580 face APRs of 16-27%.
Lender Types That Approve Subprime Borrowers
Explore four major ways to get approval for a car loan with bad credit in 2025:
Online Direct Lenders
Online lenders make getting a car loan almost as easy as shopping online. You start by entering your personal and financial information and specifying the loan amount and a down payment, if any. The site performs a “soft” credit check that won’t damage your score.
You’ll see a broad APR range in just a few minutes. The interest rate depends on your credit history. Once you decide to move forward, you’ll upload documents through a secure portal. Online lenders typically ask for proof of income, ID, and vehicle details.
You can handle the whole process online. Once you submit the forms, the lender makes a final check of your details. After approval, the loan amount, up to about $100,000 for terms of three to six years, are usually sent directly to the dealership within one to three business days.
Check how the lender will service your loan over time. Some let you log into their website to make payments, track your balance, and use free credit-monitoring tools. Others may transfer the loan to another company, so you would manage your account on a different site instead.
Credit Unions
These financial institutions are owned by their members rather than outside shareholders, so they can offer auto loans at lower rates. To join, you must usually live in a certain area, work in a particular industry, or belong to an affiliated group.
Once you’ve opened a credit union account (often for as little as $5), you can qualify for every other product, including car loans. Consumers Credit Union, for instance, offers auto loans through its TrueCar partnership. If you use TrueCar to pick up your vehicle, you can finance it for over five years at rates starting at around 4.84%.
Alliant Credit Union makes things even easier by letting you refinance after six straight on-time payments. So if you start with a 12% rate, you can drop into the single digits within a year. Credit unions are typically more bad credit friendly compared to banks. However, they still perform hard crest checks.
Dealership Networks and Captive Lenders
When you work with a dealership, it can send your loan request to several lenders simultaneously. As soon as the salesperson clicks “submit,” your information goes to various financial services, such as Ford Credit or Toyota Financial, and local banks.
Brand lenders often approve applications more easily if you’re buying one of their cars, but they balance that by charging higher interest rates or requiring you to buy extra service plans.
Don’t assume the first deal is the best. Before you sign, ask the dealer to show you a loan breakdown for each option. Compare the offered APRs and total loan costs against what you could get from an online lender or a credit union.
Buy-Here-Pay-Here Stores
These dealers combine car sales and financing all in one place, so you don’t need a bank loan to buy a car. They’ll often approve those who get rejected by other creditors, but the price is high. Interest rates can be over 29%, and you’ll usually pay about 10% of the car’s price upfront.
Expect weekly or biweekly payments. One big drawback is that on-time payments rarely get reported to credit bureaus, so you won’t build your credit score by handling your loan responsibly. You’ll pay far more over the loan life than the car is worth, sometimes double the price.
Before signing, review the terms to determine your total cost and inspect the vehicle carefully with a mechanic. Use it only when other options are not available.
Steps That Lower Your Interest Rate and Increase Approval Chances
Getting ready before you apply can save you a lot. To show you’re serious, put down at least 10 percent of the car’s price. If you can, ask someone with a credit score of 680 or higher to cosign and move your rate into the prime range.
Lenders also want to see a steady income. Gather your last three pay stubs or bank statements showing at least $1,500 each month. Finally, try to have any credit checks happen within a two-week window.
Manage the Loan After Approval
Set up autopay immediately to avoid late fees and build a good payment record. Many online banks let you split your payments every two weeks at no extra cost. After six on-time payments, ask a lender for a new offer. If your credit score goes up by 50 points, lowering your APR by just 2% can save you money.
Questions Borrowers Keep Asking
People often wonder if zero-down car deals are offered to those with poor credit. While such options exist, they mean even more risk for the lender, so they usually raise your interest rate by 1-3%.
Another concern is the long 84-month loan term that dealers often offer. The monthly payment looks more affordable, but the car’s value drops. By the fourth year, the car may be worth only about 40% of its original price, but you’ll still owe over 50% on the loan. Additionally, the cost of borrowing increases since you pay more in interest over time.
Many people also want to know how soon on-time payments improve their credit. Credit models update monthly, and making 12 on-time auto payments can often move a credit score from below 600 to the mid-600s.
Final Thought
Having bad credit makes things harder, but it shouldn’t stop you. The plan is straightforward: pay each bill on time, review your credit report periodically, and prioritize paying off your debt. Follow this routine, and your next loan will have better rates. Getting an affordable car isn’t just wishful thinking; it’s a series of simple steps anyone can follow in 2025.