Best Auto Loans for Bad Credit Online
If you’ve had past credit problems, including late payments, charge-offs, judgements, and even repossessions, you may wonder where you can get access to the best auto loans for bad credit online.
Go directly to: 10 Best Auto Loans for Bad Credit Online
Of course there is a great possibility for car buyers to get a new or used car purchase financed with an approved car loan as long as they agree to pay interest and possibly fees associated with getting the loan. Many regular lenders and dealerships work with businesses that specialize in purchases with auto financing for people who have bad credit, simplifying the auto loans comparison process for car shoppers. You can find these lenders online too. They may consider factors other than credit scores, including income, employment history, down payment amount, and whether you have a cosigner for the loan.
Online lenders also offer auto loans for people with bad credit. If you have an older car that meets a lender’s requirement for age, mileage, or type the car can be used as collateral which in turn means a greater chance for approval for an auto loan. If it doesn’t you may still have chance using a personal loan instead.
FICO-scores and Auto lenders
If you have bad credit you may have a low FICO score, or you may not have a long enough credit history to have a FICO score. There are many types of FICO scores. Auto lenders generally use the FICO Auto Score to determine a borrower’s interest rate and terms for a car loan.
The FICO Auto Score gives more weight to auto-specific credit history. So, if you’ve always paid your car loan on time but have other late payments and credit problems, your FICO Auto Score may be higher than your base FICO score.
There are several FICO Auto Score versions, and lenders choose the one they’ll use. While you can pay $39.95 to see a report including several of your FICO credit scores with the Auto Score, you can also apply for an auto loan online and allow the lender to do a soft pull on your credit to find out where you stand in general.
A soft credit pull won’t hurt your credit score. Many lenders use this method to verify your identity and collect general information about your income and payment history so they can prequalify you for a loan.
Basic auto loan requirements
Qualifying for a car loan requires a few key documents and some general personal information. Having good credit helps the process go smoothly. It also means you’ll get a lower interest rate on the loan which in turn can reduce the life of the loan or reduce the monthly payment of the loan amount.
According to the credit reporting agency Experian, a good FICO score ranges from 670 to 739. If yours falls below this range, you may need an auto loan for lower credit scores. Certain lenders specialize in bad credit auto loans, so it’s possible to get car loans with a 600-650 credit score.
Here are the documents you’ll need when you apply for most auto loans:
- Identification – Government-issued picture ID such as a driver’s license or passport
- Proof of residence – A copy of your lease agreement, phone bill, or a bank statement
- Proof of income – Such your last few paystubs or your most recent tax return
The lender or dealership will also ask for your tax ID or Social Security number, and date of birth.
If you plan to trade in your current vehicle, be prepared with the car’s make, model, year, and VIN number. If you have an auto loan, call the finance company to get the current payoff amount. If you have the title for your current vehicle and you’d like to trade it in, bring the title with you to the dealership.
If you plan to buy a used car from a private party and want to get a loan from your bank or credit union, they’ll ask for the year, make, model, and mileage, so they can determine how much money they are willing to loan you for the vehicle.
Having these documents and information available will help speed up the application process.
Guaranteed approval bad credit auto loans?
You’ve maybe seen the ads online stating that the lending company accepts 100% of all applications for auto loans, but it’s important to note that that’s different from a guarantee that they can approve all of them.
While lending companies can’t legally promise everyone loan approval, many banks and online lenders have programs for borrowers that have more relaxed minimum requirements than traditional lenders. For example, you may need to be able to prove a certain amount of income from a job.
Don’t worry if you have a bankruptcy on your credit as there is still a good chance that lenders may approve you, as long as it has been discharged and that you’ve never had a car repossessed. Other financing companies may consider your down payment and also might disregard previous late payments.
Some lenders help dealerships approve applicants who can verify their identity, show that they have a permanent address, already have auto insurance, and get a steady paycheck from a reliable source, regardless of their lack of credit or poor credit history. Unlike any of our recommended loans, this type of loan almost always have high interest rates, multiple fees and a needs a payment of 25% or more of the loan amount upfront. The rest of the loan amount is then divided into monthly payment.
During the auto loans comparison phase of your research, be sure to note the various fees and interest rates of the financing options. Like any type of auto loan, before signing documents, make sure you understand the financing terms and what the monthly payment amount is. Ask if there is a prepayment penalty for paying off the loan early. Learn about any loan origination fees or application fees. The dealership or online lender may offer to roll those fees into the loan, which could increase the total amount of money you’ll pay for access to financing.
Secured vs unsecured bad credit auto loans
Auto financing from a car dealer
Auto loans are secured with the title of the vehicle. You’ll have the car in your possession, but the business financing your purchase will hold the title until you pay off the loan. This prevents you from selling the car. It also offers the financer a means by which to get some of their money back if you default on the loan. They can legally repossess the car after you miss a certain number of monthly payments.
Unsecured auto loans
An unsecured auto loan is a personal loan. The lender does not hold the title to the vehicle. You can get a personal loan for any reason. This type of financing usually is a little harder because the lender has no collateral. When buying a car it usually is easier and a greater chance for approval if you get a car loan than it would be to try with a personal loan.
Financing a new car at a car dealer almost always means auto title loans, which often uses collateral which means that the car owner uses the title of a car they already own as collateral for a personal loan. These types of loans is typically expensive and is also only available in some states.
Where to find no credit check auto loans?
For those with very low credit scores, an auto loan advertised as no credit check financing may make sense. With this type of loan, you’ll still have to show proof of reliable income and possibly make a large down payment and pay loan fees so they can feel assured that you can handle the monthly payment for the loan.
You should expect at least a soft pull of your credit report so the lender can verify your identity, as required by law. Before any company has the legal right to conduct a hard pull of your credit file, you must give them written permission. When this happens, a CRA will request details that will document the hard pull, and you may see your FICO credit score decrease by a few points.
Large dealerships may offer “no credit check auto loans” in-house. They may work with a finance company that provides this type of loan, or they may offer Buy-Here Pay-Here financing. Smaller dealerships that offer only used cars may also offer Buy-Here Pay-Here financing or Rent-to-Own programs.
With this type of loan, your income and down payment determines the amount of money you can borrow and the offered interest rate which in turn affects the monthly payment amount. Typically, the dealership or finance company will roll finance charges into the loan. You may be charged a loan origination fee or application fee. In some areas, you may pay as much as a 30% interest rate on your loan. A lower credit score usually means a higher interest.
For these reasons, it’s crucial to be aware of every fee and additional charge you’ll incur with any auto loan. Be sure to ask the lender about prepayment penalties so you understand whether it’s possible to eventually refinance the loan at a lower interest rate.
