Recommended Subprime Car Loans for new and used cars

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Sometimes called “second chance auto loans” subprime car loans help people with credit problems get the financing they need to buy a used car. Not all lenders offer subprime auto loans. Others specialize in this specific type of loan.

For those with a rough credit history and FICO scores below the mid-600s, a subprime auto loan offers the chance to get a much-needed loan while rebuilding credit. Subprime auto loan lenders charge higher interest rates and may also require larger down payments, origination fees, and application fees.

For many borrowers, it’s possible to improve a credit score and open up a wider variety of financing options. Most lenders use a version of the FICO credit score to help them understand past payment habits. An individual’s history of on-time payments, their total amount of available credit compared to their credit lines, the mix of credit types in the file, delinquencies, and public records about debts all contribute to the credit score.

So, which subprime car loans for new and used cars do we recommend? We’ve made a selection out of over 30 loans, and here’s those that approve the most loans at this time.

Required Credit Score
580
Amounts
Up to $40,000
APR
Starting at 5.99%
Bad credit
Allowed
Loan Terms
2 months to 5 years
Amounts
Up to $10,000
APR
Individual rates
Bad credit
Allowed
Loan Terms
3 months to 6 years
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Where to get deep subprime auto loans

With a FICO credit score of less than 580, your only option may be a deep subprime auto loan. It’s important to remember that a low credit score doesn’t mean you should skip the process of shopping around.

In fact, interest rates and fees are highest for lenders with deep subprime credit scores, so considering all available options is a smart way to get the best possible deal.

Car dealerships may offer loans for people with FICO credit scores below 580. These rates include a dealer’s fee for processing the financing, which could make your already-expensive auto loan cost even more. Before accepting financing through a dealership, find out if it’s possible to get a loan from a local credit union, bank or online lender.

The best subprime auto loans are typically from finance companies on the internet. Although credit unions and banks may have unadvertised programs for borrowers with past credit problems.

Refinancing a subprime auto loan

If you’ve worked to rebuild your credit by making payments on your subprime auto loan on time, you may be able to refinance the loan at a lower interest rate. This is an option only for borrowers who have seen an increase in their FICO credit scores.

Contact your current lender to find out if they charge prepayment penalties. If they do, it may not be worth it to refinance the loan. Prepayment penalties require you to pay all the interest on the loan, regardless of when you pay it off.

First, check with the original lender to find out if they offer in-house refinancing options. If so, you may be able to get better terms inside a seamless transition from one loan to another.

If you want to change financing companies, treat the search for a new lender like you would for any other lender. Shop around, compare offers, and pay attention to the fine print. Also, be aware that extending the term of your loan will increase the amount of money you pay for interest charges over the life of the loan.

Getting prequalified for the best subprime auto loans

While you may be tempted to take the first loan approval you receive, it’s crucial to take your time, read the fine print, and compare loan offers against each other. One way to do this is to get prequalified.

Prequalifying for an auto loan, no matter your credit score, requires only a soft pull of your credit file. You won’t see a dip in your credit score as a result. Prequalification doesn’t guarantee approval, however. You’ll still have to formally apply for the loan and get the OK from the financing company.

Never start your search for subprime lenders auto loans at a car dealership. They may rush the process, encourage you to take the first loan that comes along, or push you into accepting terms that aren’t the best for your situation.

Instead, conduct your research independently. Walking into the dealership with a preapproval letter in hand will help you negotiate the best possible price for your used car, as well.