Direct answer: You can get auto loans for bad credit from credit unions, banks, online lenders and car dealers. You will usually pay a higher rate, and the deal often comes with extras that raise the cost. Get a loan offer from a bank or credit union before you shop, then judge every deal by its total cost, not the monthly payment.
A low credit score does not lock you out of a car. It makes the money you borrow cost more. You pay that cost a little at a time, over five or six years of payments.
If you have been turned down before and dread sitting in the finance office, you are not alone. You have more say in this deal than the ads suggest.
The Federal Reserve’s latest G.19 report covers August 2026. It puts the average 60-month new car loan at commercial banks at 7.54%. That figure is an average across all bank borrowers. Auto loans for bad credit usually cost more than that, and most of your extra cost comes from that gap.
What counts as bad credit, and who will lend to you?
No one score makes credit “bad.” Each lender draws its own line. Your score sums up how you have handled debt in the past. The CFPB explains how credit scores work and why your number can differ from one scoring model to the next.
Lenders look past the score, too. They weigh your income, your other debts and how long you have held your job. A bigger down payment can help almost as much as a better score.
Where you borrow shapes what you pay. Here are the main options side by side.
| Where you borrow | How it works | What to watch |
|---|---|---|
| Credit union | You join, then apply for a loan | Membership rules; worth asking first |
| Bank | Direct loan you take to the dealer | May be stricter on low scores |
| Online lender | Apply online, get an offer to shop with | Compare the APR and fees, not the ad |
| Dealer-arranged loan | Dealer sends your application to lenders | Dealers typically profit from arranging it |
| Buy here, pay here lot | The dealer is also the lender | Ask if on-time payments get reported to credit bureaus |
Why does bad credit cost so much more?
Lenders charge more when they think you are more likely to miss payments. The higher rate covers that risk. Interest runs for the whole term, so a high rate costs you every month for years.
Here is an example. These rates are made up to show the math. They are not quotes or averages for any credit score.
| Example: $20,000 loan | Monthly payment | Total interest |
|---|---|---|
| 7.54% for 60 months | about $401 | about $4,070 |
| 18% for 60 months | about $508 | about $10,470 |
| 18% for 72 months | about $456 | about $12,840 |
Look at the last two rows. Stretching the 18% loan from five years to six cuts the payment by about $52. It also adds about $2,370 in interest. Most bad credit car deals come down to that trade.
The CFPB says a shorter loan costs less overall. A longer loan raises your total interest. It also raises the risk that you will owe more than the car is worth. At a high rate, both of those grow faster. To see how much a better score can save you, read how your credit score changes what a car loan costs.
What federal regulators say you can push back on
A car loan is open to bargaining. The CFPB says you can negotiate the APR and the length of the loan. It also lists add-ons, prepayment penalties and dealer fees as open to negotiation.
The FTC’s guide to financing a car adds a few rules worth following:
- Get your free credit reports at AnnualCreditReport.com or 1-877-322-8228 before you shop. Dispute any errors you find.
- Get a loan offer from a bank or credit union before you visit the dealer. That gives you a rate for the dealer to beat.
- Ask for the out-the-door price in writing.
- Focus on the total cost, not the monthly payment.
- Know that a co-signer owes the debt just as much as you do.
Buying used? The FTC’s used car guide says dealers must post a Buyers Guide on the car. A vehicle history report does not replace an inspection by a mechanic you choose. An unreliable car paid for with an expensive loan is a hard spot to get out of.
The fine print that hurts most
Buyers with low scores often get hit by several costs at once. Look for these before you sign.
Add-ons rolled into the loan
The CFPB says products sold with the loan, such as GAP or an extended warranty, are generally optional. If someone says one is required, ask them to show you where the contract says so. The FTC warns that extras like GAP and VIN etching can add thousands to the deal.
Here is an example. Say you add a $2,000 service contract to the $20,000 loan at 18% for 72 months. Your payment goes up about $46 a month. Once interest is counted, that contract costs you about $3,280.
Washington’s insurance regulator says most of the price of many service contracts is seller profit, so ask for a lower price. Before you agree to one, read how to decide if an extended warranty is worth it.
GAP can make sense on a long loan with little money down. If the car is totaled, it pays the difference between your loan balance and the insurance payout. Compare its price before you add it.
Trading in a car you still owe on
If you owe more than your trade-in is worth, that leftover debt can be added to the new loan. The CFPB says this makes the new loan more expensive. Get your payoff amount first. About a week after the sale, check that the old loan was actually paid off.
Prepayment penalties
Some loans charge a fee if you pay them off early. The CFPB notes that some states ban these fees. Check your Truth in Lending disclosures. If you refinance later, you have to pay off the old loan in full, so a penalty eats into what you save.
Should you take any loan now and refinance later?
You will often hear this advice: take whatever loan you can get, pay on time for a year, then refinance. Sometimes that works. Sometimes the first loan makes the plan fall apart.
When the plan works
It works best when the first loan has no prepayment penalty and no rolled-in debt from an old car. The term should be short enough that you are not upside down. Once your score improves, our guides on how to refinance your car loan and the easiest way to refinance walk through the steps.
When it backfires
Picture a long term, a stack of add-ons and an old balance rolled in. Now you owe much more than the car is worth. That makes a later refinance harder to line up, and your plan to fix the rate later may never happen.
When waiting is the better move
If your current car still runs, waiting a few months can help. You can use that time to fix report errors and save a bigger down payment. Waiting also has a cost. The BLS reports that motor vehicle maintenance and repair prices rose 5.8% over the 12 months ended September 2026. Compare likely repair bills against the extra interest a rushed loan would cost you.
Where the money goes
In my 18 years in lead generation across auto finance and related markets, I have seen bad credit loan ads lead with a tiny payment and a promise to take any credit. Neither one tells you the price of the loan. Many of those ads are lead forms. Your details can be passed on to dealers or lenders who pay for the chance to call you.
At the dealership, the FTC notes that dealers typically profit from arranging your financing. The finance office also sells add-ons, and on many service contracts most of the price is profit. All of that is easier to hide inside one monthly number.
From the marketing side, I can tell you the whole pitch is built around the monthly payment. If you keep the conversation on the APR, the term and the total of payments, the hidden costs have nowhere to hide.
Related: learn what dealers don’t tell you about car loans, or start with the basics of how car loans work.
Seven moves before you sign
- Pull your credit reports. Use AnnualCreditReport.com and dispute any errors before you apply.
- Set a budget by total cost. Include the insurance on the new car. If your premium already feels high, check signs you are paying too much for car insurance.
- Get a loan offer first. Try a credit union or bank, plus one online lender. The CFPB auto loan tools can help you compare.
- Settle the car price before financing. Get the out-the-door price in writing.
- Ask the dealer to beat your offer. Compare at the same term, so a longer loan does not hide a worse rate.
- Turn down add-ons at first. Ask which ones the contract requires. Price anything you want on its own.
- Read the final contract. Check the APR, the term, the total of payments and any prepayment penalty against what you agreed to.
What not to do
- Do not bargain by monthly payment alone.
- Do not ask someone to co-sign unless they understand they owe the full debt.
- Do not go silent if money gets tight. The CFPB advises calling your lender early and getting any agreement in writing.
Frequently asked questions
Can I get a car loan with a credit score under 600?
Often, yes. Each lender sets its own rules, so one score rarely ends the conversation. Lenders also weigh your income, your other debts and your down payment. Expect a higher rate than the bank averages in the Federal Reserve data. Apply with a credit union and at least one other lender so you have real offers to compare.
Is a buy here, pay here lot a good idea?
Treat it as a last resort. At these lots the dealer is also your lender, so one seller sets both the car price and the loan terms. Ask for the APR and total of payments in writing. Also ask whether they report your on-time payments to the credit bureaus, since on-time payments that get reported are how a loan helps rebuild your score.
Do I have to buy GAP or a warranty to get the loan?
The CFPB says these products are generally optional. If a lender or dealer says one is required, ask them to show you where the contract says so. If you already bought one, you can cancel optional add-ons. You may get a refund, including when you sell the car or pay the loan off early.
When can I refinance a bad credit car loan?
You can apply at any time. Refinancing pays off most once your score has improved or rates have dropped. Check your contract for a prepayment penalty first, since refinancing means paying off the old loan in full. Compare the new APR and total cost, not only the new monthly payment, before you switch.
What should I do if I fall behind on payments?
Call your lender early, before you miss a payment if you can. Ask what options they offer, and get any agreement in writing. Selling the car or refinancing may also help. The CFPB warns that in some cases a car can be repossessed without warning. Rules differ by state, so talk to a licensed attorney in your state if you face repossession.
Your next step
This week, pull your free credit reports and ask a credit union for a loan offer. Then shop for the car with that offer in hand and the total cost in mind. A higher rate is often part of borrowing with bad credit, but extras you never asked for do not have to be.
Sources
- Federal Reserve: Consumer Credit G.19
- CFPB: What things can I negotiate when shopping for a car or auto loan?
- CFPB: Am I required to buy an extended warranty or GAP to get an auto loan?
- CFPB: Can I prepay my loan at any time without penalty?
- CFPB: What should I do if I can’t make my car payments?
- FTC: Financing or leasing a car
- FTC: Buying a used car from a dealer
- BLS: Consumer Price Index news release