How to Get Approved for a Car Loan with Bad Credit?

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Did you know? It is possible to qualify for a car loan with bad credit. The caveat is that the process looks a little different than it would if you had excellent credit. But not to worry, we’re going to walk you through how to prepare yourself so you can get approved for a car loan.

Understand Your Credit Score

Whether your score is good, bad, or ugly, it’s essential to know what it is. You need to check your credit report every year for several reasons:

  1. You must confirm that everything on your report is accurate. Mistakes do happen, even to credit bureaus, so you will want to verify that there are no errors.
  2. You can’t improve your score if you don’t know what it is.
  3. Understanding your credit score will enable you to make the best decisions in the car loan process and empower you to negotiate the best interest rate.  

Understand Your Monthly Payments

The truth is that if you have a bad credit score, it will be harder to get a car loan. Then, when you do qualify, you’ll likely have a higher interest rate. However, it’s still possible to get an auto loan with affordable payments.

There are three factors that determine your monthly payments:

  • The Principal

The principal is the car’s total cost, including all the fees, the price of the vehicles, any upgrades, and taxes.

  • • The Term

The term refers to the length of your car loan. The shorter the length of the loan, the less interest you’ll pay. For example, Lending Arch offers loans that range in length from 12 to 36 months.

  • • The Interest Rate

Lenders base your interest rate on a variety of factors that are determined separately for each applicant. When you have bad credit, your interest rate is usually higher because lenders believe you are more likely to default on your loans. Therefore, to compensate for this risk, lenders charge you a higher interest rate.

Look Into Pre-Approval

If you can get pre-approved for a car loan, it will let you see your options before going into a dealership. This does not mean you agree to a loan. It just means that you’re getting an estimated interest rate and a maximum loan amount. Armed with this information, you’ll have a better idea of what kind of car you can afford. To get pre-approved, you’ll need to provide the following information:

  • • Your employment information and income amount
  • • Your driver’s license
  • • Your address
  • • The down payment amount you believe you will make

Find the Right Lender

If you have bad credit, you will need a lender that specializes in bad credit auto lending. This is because they will better understand your situation and be committed to finding a solution that works for you.


Even with bad credit, you can get approved for a car loan. You just have to be prepared in advance. To be prepared, you should understand your credit score. This will allow you to make appropriate buying decisions as well as negotiate your interest rate. You may also want to understand how your monthly payments are going to break down. This will also help inform your buying decision. Additionally, if you get pre-approval for a loan, you will know ahead of time what to expect at the dealership and can make your purchasing decision accordingly. Lastly, research lenders and find the ones that work specifically with subprime borrowers.

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