4 Ways to Get a Car Loan with a Bad Credit History

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Even with poor credit.

November 9, 2016

If you don't have a set of wheels that you can drive around, you are often at a great disadvantage. There are ways you can obtain a new or used car, even with a car loan with bad credit history.

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1. The Traditional Strong Co-Signer

The traditional way a person who has a history of bad credit or poor credit auto loans is to find a friend or relative who will act as the actual purchaser of the car. It may be in your name, but your co-signer is actually the person responsible for paying for the car, should you decide that it's too much money and want to walk away. For the most part, most people don't want to stick their relative with a large monthly payment, simply because they don't want to pay for a car anymore. So, the usual result is that you keep making your monthly payments on the vehicle, so that your co-signer doesn't have to.

2. The In-House Credit Department

Many car dealers maintain an in-house credit department for people with poor credit histories, or those who have no credit history at all. These are the companies that often provide no credit auto loans to people as the dealership itself advances you the money and the vehicle you need to purchase. The keys to this type of dealership are that you must make a monthly payment at the dealership, the payment is often in cash and the dealership does reserve the right to terminate the arrangement if you're late for a payment.

3. Captive or In-House Credit Companies

Captive or in-house finance companies are often the unseen hand that helps the person with a bad credit rating obtain a new vehicle. They provide not only the financing, but also make the requirements that the customer must meet in order to purchase the vehicle. In general, they will tell you how much you have to put down, and it could be a substantial amount. This has the double effect of not only lowering the amount the captive house must put up for the car but it also increases the amount of equity you have in the vehicle. This means you'll be more unlikely to walk away from the vehicle, especially if you have $4,000 or more tied up.

4. Purchasing a Clunker from a Junkyard for Short-Term Loan Money

There are many junkyards that actually take in cars and will often arrange short-term financing arrangements where you pay them directly–sometimes it's almost like a store layaway plan–and often either drive out of the lot with the clunker or you wait until you've paid it down and then take possession. Of the two methods, the second is preferred because you own the car at the end. The great thing about this is that you can then invest in repairs and slowly rebuild your "junker" into a respectable vehicle.

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