Getting an auto loan with bad credit may not be the easiest thing to do but it can be done. Be prepared for more shopping around and doing extra leg work. The good news is you are not necessarily destined to be without a vehicle, especially when owning a vehicle can lead to a higher paying job or provide the means to obtain a second job.

To people with high credit, getting an auto loan with an interest rate as low as 0% is possible, but if you have a low credit rate, you might be looking at interest rates as high as 20% or more. Your credit score will dictate what type of interest you will end up paying on your car loan, and the lower the score may ultimately mean a higher interest rate.

Lenders want to feel confident that borrowers will pay their money back on time and in full, so consumers with bad credit pose a high risk. Lenders will assume that by lending you money for a car loan that they will be more susceptible to missing payments, defaults and having a high debt-to-income ratio all raise red flags for lenders, who will charge a high interest rate when they do not feel confident they will get back the money they are lending.

According to, in addition to reviewing your credit score, lenders will also take a look at other factors that are not included in your credit report such as:

  • Home
  • What type of work you are applying for
  • Your work history
  • Length of time worked at your current job

Anyone shopping for a car should also shop around for a lender. Do not panic and accept the first offer of a loan you receive. There are many sources for an auto loan and you should consider them all as rates will vary depending on your available collateral and/or the vehicle you wish to purchase. Approach banks and credit unions for a ‘bad credit car loan’, ask about in-house dealer financing and research finance companies for those with good reputations. has savvy advice when it comes to ways to save money on auto loans.

  • Choosing a shorter term loan. A 3 year loan will typically carry a lower interest rate than a 5 year loan.
  • Buy a newer vehicle. Loans for used vehicles are usually more expensive than those for new vehicles.
  • Resist the urge to load up on extras. Do not let the dealer convince you to go for the ‘extras’ like rustproofing, paint protection, VIN etching and more. It may sound like a good idea at the time but those little extras quickly add up.

Lastly, when shopping for an auto and auto loan, keep away from the ‘Bad Credit, No Credit, No Problem’ car dealers. These dealers are known to prey on the desperate, students, new immigrants and those with bad credit. Their rates can be extremely high and the quality of the vehicles usually is not tops and you may end up paying for extensive repairs.

A new or used vehicle can mean freedom but it can also mean extra income via a second job and/or an opportunity to obtain a higher paying position within your present company.


Helen Siwak is Editor-in-Chief of BLUSHVancouver & EcoLuvLux Lifestyle Blog | Lifestyle contributor to Daily Hive (VancityBuzz) | West Coast contributor to Retail-Insider | contributing writer for Marble Financial.