Are Low Interest Auto Loans Possible with Bad Credit?

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Even with poor credit.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - February 23, 2018

Borrowers with bad credit typically won’t qualify for low interest rates for auto financing. If that bursts your bubble on low interest rate dreams, don’t give up on an auto loan – just prepare for what’s ahead.

Low Interest Rates and Bad Credit

The best interest rates go to borrowers with the highest credit score. In the world of interest, “best” means lowest. All those zero-percent financing commercials enticing buyers to flock to dealerships aren’t for everyone. They’re only given to buyers with excellent credit.

The lower a borrower’s credit, the higher interest rates generally become. In fact, subprime consumers are likely to see interest rates between five and 10 percent higher than borrowers with good credit, and it’s not uncommon to see rates in the double digits and sometimes even into the 20 percent range.

Getting Your Best Interest Rate

Just because a borrower doesn’t qualify for the lowest rates doesn’t mean they should settle for the first offer. Credit is the largest basis for interest rates, but rates also vary by lender, loan term, and vehicle, so rate shopping is a must.

When a potential buyer is preparing for a large purchase, such as a car, credit bureaus allow for a certain amount of shopping. Any inquiries made within a 14- to 45-day window (for the same type of financing) typically count as one inquiry, which lowers the impact on the borrower’s credit.

Save Money on Your Loan

There are steps a borrower can take to save money to make up for higher interest rates. Since interest accrues daily based on the loan balance, having a larger down payment can offset a high rate. By choosing to put down at least 20 percent of the vehicle’s selling price, a borrower can save money by shortening the term of their loan. Keeping a loan term as short as possible – 60 months or less – could save a borrower hundreds or even thousands in interest charges.

Lastly, if a borrower has a simple interest loan (which is most common) they can save money by paying off a loan early. Because of the 52 weeks in a year, making bi-weekly payments creates 13 monthly payments a year, instead of 12, which shortens the loan term.

The Bottom Line

As a bad credit car buyer, you’ll face higher interest rates, but that’s no reason to shy away from a loan. One thing you should do is make sure you’re working with a lender that can handle challenging credit situations. If you don’t know where to turn to find a lender that’s right for you, CarsDirect can point the way.

We work with an extensive network of special finance dealers that have proper lending resources for consumers struggling with poor credit. Don’t hesitate – fill out our auto loan request form to get started today!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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