Can I Lower My Interest Rate on a Car Loan?

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Even with poor credit.


Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - December 10, 2019

Unless you pay cash, interest rates are part of the car buying experience. Just what your interest rate is going to be is hard to say. It depends on many factors, including your credit score. Generally, the better your score, the lower your interest rate. However, just because you have bad credit doesn’t mean you have to settle for a high interest rate – there are ways to lower your rate and make financing your vehicle more affordable.

How to Get a Better Interest Rate

It’s not uncommon for borrowers dealing with poor credit to get approved at an interest rate in the double digits. In fact, according to Experian’s State of the Automotive Finance Market report covering the third quarter of 2019, subprime borrowers – those with credit scores between 501 and 600 – qualified for average interest rates of 11.71% on new car loans, and 16.89% on used vehicle loans.

These high interest rates increase the overall cost of the loan, but there are three solutions that could help lower the interest rate you qualify for:

  1. Improve your credit score – Your credit score is a big factor when it comes to determining your interest rate. If you don’t need an auto loan right now, you should give yourself some time to raise your credit score. The fastest way to do this is to pay your bills on time each month, reduce your credit card balances, and pay off any outstanding debts.
  2. Add a cosigner – If you have enough income to qualify but your score isn’t great, you could add a cosigner with good credit to the loan. Cosigners let you “borrow” their good credit in order to help you get approved for financing. Their name isn’t on the title, and their good credit score could get you a better interest rate. You can’t combine incomes to qualify for a loan, but if poor credit is your only issue, a cosigner could be what you need.
  3. Add a co-borrower – Unlike cosigners, co-borrowers are on the title alongside you. Not only is their credit score considered, but their income can be added to yours if they’re your spouse. You could qualify for a better interest rate because you qualify for the loan together.

Can I Lower the Interest Rate on My Current Car Loan?

If you already have a bad credit car loan, did you know that you could potentially lower your interest rate? It’s true, you can do this by refinancing.

When you refinance, you’re replacing your current loan with a new one. You can check with your current lender about refinancing, or you could apply with a different one. However, in order to refinance, you need to qualify for a new loan.

In most cases, your credit score needs to have improved since taking out your initial loan. In addition, your vehicle needs to qualify by meeting the lender’s refinancing requirements; this includes the car’s age, mileage, current value, and total loan amount.

If you're interested in auto refinancing, our trusted partner can help you get the refinancing process started.

Don’t Let Bad Credit Get in Your Way

Qualifying for a no interest loan is next to impossible when it comes to bad credit car financing. However, you may not have to face a high rate if you plan accordingly and get some outside help. If you already have a loan, you may be able to take advantage of the benefits of refinancing to qualify for a lower interest rate.

If you’re in need of a vehicle right now and worry about where you can get financed, we want to assist you. At CarsDirect, we work with a nationwide network of dealerships that have the lending resources available to handle unique credit situations.

Just fill out our free, no-obligation auto loan request form, and we’ll get right to work connecting you to a dealer.


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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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