If you have poor credit, it can be hard to get an auto loan. But, there are several options, including Low-credit score lenders, subprime lenders, and the age of the car. These options can help you find the lowest interest rate for bad credit auto loans. Listed below are the top three subprime lenders, with their best rates.
Low-credit score lenders
Consumers with good credit scores can get loans with very low interest rates. On the other hand, people with low credit scores are viewed as higher-risk borrowers by lenders, and as such, they’re forced to pay more interest. These higher rates can add up to thousands of dollars in interest, if not more.
If you’re concerned about your credit score, pre-qualifying for an auto loan is an ideal way to save money on interest rates. It will not hurt your score, but it will help you find the lowest interest rate. You can use an auto loan calculator like NerdWallet’s to compare pre-qualified offers. This tool allows you to input your estimated rates, down payment, and trade-in value. It will then calculate your monthly payments and the total cost of the loan.
Subprime lenders
In the United States, auto lenders owe consumers a combined $1 trillion. This amount is made up largely of loans to consumers with subprime credit scores. These consumers are the most likely to default on loans and pay the highest interest rates. In its latest Data Point report, Consumer Reports looked at subprime auto lenders and found that interest rates varied widely. These differences are unlikely to be attributed to differences in risk of default.
Subprime lenders offer bad credit auto loans through financial institutions such as banks, credit unions, and finance companies. Some of these institutions offer financing at “buy here pay here” dealerships where monthly payments are made directly to the auto dealer. However, the Consumer Financial Protection Bureau warns that borrowers should be aware of the higher interest rates charged at these dealerships.
Length of loan
The length of a bad credit auto loan will vary depending on several factors. For example, if you are in dire need of a new car, a shorter loan term will save you a lot of money. However, you will likely have to pay higher monthly payments. Also, the sooner you pay off your loan, the better. This means that the vehicle you purchase will be worth more when you sell it.
