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Who is Lending to Car Buyers with Bad Credit?

If you have a bad credit and are wondering whether you could still get approved for a car loan, you’ll find out, as you read on, that a car loan is still possible in your case. There’s actually no reason to be so anxious about a low credit score. These are the days when the auto lending industry is leaning toward the subprime market.

Today’s Environment

Why is there no need to worry when you have a bad credit? That’s because interest rates are low, credit standards are loosened, and competition for the subprime market is tighter today. What do these mean?


First, car loan rates, in general, are lower these days mainly because of the Fed’s efforts. Well, you cannot expect the rates to stay this way forever. This trend is seen to end in a year or two.

Second, banks are becoming more confident about lending to consumers, regardless of their credit. That’s why they have loosened their credit standards. That means that even if you have a low credit score, it might qualify now for an auto loan from a bank.

And lastly, since the onset of the post-recession period, dealers and lenders have seen how lucrative the subprime market is. Numerous people couldn’t pay off their loans as a result of massive layoffs and other factors. This caused them to acquire bad credit. But vehicles remained a necessity so they still need to take out a loan for one. This is the “enlightening moment” for auto loan providers where most of the market is in the subprime tier and many are actually paying up.

Providers to Consider

Now, who are you going to approach for a bad credit car loan? The first lender you should approach is the credit union you are a part of. Credit unions have the lowest interest rates in most cases. But aside from that, they can look past your credit and still accept your application and give you a competitive rate. Isn’t that great? That’s because credit unions do not operate for profit but merely for their members’ interests.

You can also check out banks. As has been mentioned, they are now more open to credit-challenged car buyers. Their rates are also lower than in the past years. However, you may still find them higher than the rates offered in credit unions.

Another popular source for bad credit auto loans is dealerships. Dealerships provide financing in two ways: Either they act as a middleman, that means arranging financing for you, or provide financing themselves. Both have pros and cons and you would hear experts suggest making dealership financing your last resort. That is because they usually have higher interest rates than other sources. Nevertheless, shop around to see for yourself which offer best suits your financial situation.


Before anything else, do not forget to get a copy of your credit report to check your credit standing first. You can’t let abusive lenders pull a trick on you by lying about your credit score. You need to make sure that the details in your report are accurate and true. It’s imperative to look for errors and dispute them if you find any.

And as a final note, improve your credit before applying for a car loan as much as possible. There’s still nothing better than repaying an auto loan with a just and low interest rate. Repaying a high-interest car loan always jeopardizes your finances and credit more.

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