Can I Get a Low Car Loan Interest Rate Due to COVID?

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - October 8, 2020

The coronavirus pandemic has impacted the economy, to say the least, but a more positive side effect of the situation is that interest rates aren’t expected to rise anytime soon. For car shoppers with lower credit scores, now may be the time to get into a vehicle with a decent interest rate.

Interest Rates Staying Low

Unemployment rates skyrocketed to record-breaking levels during COVID shutdowns, and as one may expect, the economy took a hit. Spending slowed down in most sectors, and the automotive industry tried its best to hold out. However, things appear to be recovering for now, and, in order to stimulate economic growth, interest rates aren’t expected to rise for a while.

The Federal Open Market Committee (FOMC) of the Federal Reserve has voted to keep interest rates between 0% to 0.25%, largely due to the coronavirus pandemic, until 2022.

If you’re a bad credit borrower, you’re likely wondering, “How does this affect me?”

When the economy slows down, interest rates are lowered to incentivize businesses to invest and hire more people, and encourage more spending in general. This can also impact auto loan interest rates, since they’re tied to the “prime rate” – the rate that banks charge each other which influences rates offered to consumers.

When the prime rate falls, interest rates for everyone else on the credit score spectrum usually fall, too.

Bad Credit and Car Loan Interest Rates

While bad credit borrowers don’t typically qualify for the best car deals, interest rates staying low could mean qualifying for more favorable terms on your next auto loan.

It’s not uncommon for borrowers with poor credit scores to qualify for car loan interest rates in the double digits. However, with rates expecting to stay low for a while, it could mean qualifying for a lower interest rate than you would have expected. The lower your interest rate, the more money you can save when you need to finance your next vehicle.

Now is probably a good time to start rate shopping even if you have a less than perfect credit score.

Rate Shopping With Bad Credit

Rate shopping is applying with different auto lenders, seeing what you can qualify for, and choosing the best deal. Rate shopping can be a little more difficult for borrowers with less than perfect credit, but don’t let that discourage you from looking for the best deal you can qualify for.

Spending a little time to research different lenders in your area can mean big savings in terms of interest charges. Once you find a few lenders that you’d like to apply with, do so in a short period of time to lessen the negative impact on your credit score.

When you apply for new credit, like a car loan, the lender makes a request (or inquiry) for your credit reports to take a look at your borrowing history and view your credit score. This is called a hard inquiry, and it can cause some damage on your credit score, usually around five to 10 points. While this can make you hesitant to apply for new credit, you can apply with multiple lenders within two weeks and only have one hard inquiry reflected on your credit score.

The credit bureaus know that when you apply for new credit with multiple lenders in a short window, you’re looking for the best deal. Instead of dinging your credit score for each pull, the bureaus list all of the hard inquiries on your credit reports but only one hurts your credit score.

Take advantage of this ability to rate shop and look for the best deals you can while rates are low. While having a lower credit can mean having to look a little harder to find the right lender for your credit, there are lenders out there that can work with credit challenges – you just have to know where to look.

Finding a Bad Credit Dealership

Having bad credit can make it hard to find a lender that's willing to give you a chance at auto financing if you don't know where to look. However, there are lenders that can work with unique credit situations, and we want to help you connect with one.

Subprime lenders are third-party lenders that are signed up with special finance dealerships.

Whether you have bad credit, no credit, or the tough times have taken a toll on your credit, subprime lenders look at more than just your credit reports to determine your ability to pay for a car loan. Here at CarsDirect, we know which dealers are signed up with these bad credit auto lenders.

To start the search for a dealership near you with the lending resources you need, complete our free car loan request form.


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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