Home Bad Credit Auto Loans in 2021
Kane Pepi

Are you on the lookout for financing, but your credit profile is less than ideal? If so, you might be forced to use a specialist bad credit lender. While such lenders allow you to obtain loans with a poor or bad credit rating, the interest rate is likely to be sky-high.

One such alternative to this is to use a bad credit auto loan lender. In doing so, you stand the chance of reducing your APR rate by some distance. You will, of course, need to be named on the vehicle logbook, and the amount that you can borrow will be dependent on the market value of your car or motorbike.

In this article, we explain the ins and outs of how bad credit auto loans work, who is eligible, how much you can borrow, and more.

In This Guide
Reviewers Choice
Available Loan Amount
$1,000 - $50,000
Available Term Length
3 or 5 years
Representative APR
7.69% to 36%
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One Main Financial
Available Loan Amount
$1500 - $20,000
Available Term Length
24 months
Representative APR
16% to 35.99%
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Lending Club
Available Loan Amount
$5000 - $40,000
Available Term Length
3 years
Representative APR
6% and 35.89%
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Did You Know? Although bad credit auto loans are a great alternative to payday loans, you will need to put your vehicle up as collateral. As such, if you fall behind on your loan repayments, you could have the vehicle repossessed.

What is a Bad Credit Auto Loan?

Bad credit auto loans allow you to avoid the super-high APRs that come with payday loans

In a nutshell, an auto title loan is a financing product that allows you to borrow money against your car or motorbike. In a similar nature to a homeowner loan, the amount that you can borrow is based on the value of the asset that you wish to put up as security. This is usually expressed as an LTV (Loan-to-Value) percentage against the current market value of the vehicle.

For example, let’s say that your car is worth $10,000 and the bad credit auto loan provider is willing to offer you an LTV of up to 60%. This means that you would be able to borrow a maximum of $6,000 from the lender (60% of $10,000).

Auto loans are often more a favorable financing option for those with bad credit, as they usually come lower interest rates than payday loans. This is because payday loans are unsecured, meaning that you are not required to put any assets up as collateral.

This is in stark contrast to bad credit auto loan providers, as they are willing to offer cheaper APR rates because they have the safety net of your car or motorbike. If you were to default on the loan, the lender would have the legal remit to seize the vehicle and sell it at auction. As such, you should only take out a bad credit auto loan if you are 100% sure that you can meet your monthly repayments.

In terms of the fundamentals, your auto title loan repayments will be fixed. You’ll likely pay the same amount on the same date of each month until the auto loan is repaid. This allows you to spread your repayments over a number of months or years. It also allows you to budget in advance, as you know how much you need to set to one side to cover your repayments. In this sense, auto title loans are very similar to personal loans, but they are secured by your vehicle.

You need to be named on the logbook of the car or vehicle to qualify for a bad credit auto loan. The lender will likely ask you to provide supporting documentation for this, so make sure you have your logbook to hand.

Pros and Cons of Bad Credit Auto Loans


  • A great financing option if your credit profile is less than ideal
  • Borrow an amount proportionate to the value of your car or motorbike
  • The lender is not required to keep your vehicle
  • Obtain financing in 1-2 days
  • Much cheaper than unsecured payday loans
  • Get an instant quote by entering your vehicle registration number
  • Complete the entire application process online or via your mobile device


  • You can have your vehicle repossessed if you default on the loan
  • The car valuation might be less than you had hoped for

How do Bad Credit Auto Loans Work?

Regardless of which lender you go with, the end-to-end auto loan funding process remains constant. This includes the online application itself, providing supporting documentation, receiving the loan funds into your bank account, and then making your repayments each month.

With that said, if you’ve never applied for a bad credit auto loan before, it might be worth reading the step-by-step guidelines that we have outlined below.

Step 1: Find an Auto Loan Provider

First and foremost, you will need to find an auto loan provider that accepts bad credit applicants. You will need to look at a range of additional metrics when choosing a lender, such as how much you can borrow and for how long. You should also look at the lender’s representative rate to gauge how much interest you are likely to be charged.

Step 2: Check How Much Your Vehicle is Worth

Bad credit auto loans are based on the current market value of your vehicle

Once you have found a bad credit auto loan provider, you will then need to check how much you can borrow against the value of your car or motorbike. Most lenders allow you to do this before you start the application.

All you need to do is enter the vehicle registration number alongside the make and model of the car, and the system should give you a valuation on the spot. The lender will also state what LTV they are able to offer against the valuation.

Step 3: Complete an Online Application

Now that you’ve chosen a lender and assessed how much you can borrow, you will now need to complete an online application form. This will require you to enter some personal and financial information.

Your personal information will include:

  • First and Last Name
  • Date of Birth
  • Home Address
  • Social Security Number
  • Driver’s License Number
  • State ID Number
  • Contact Details

Your financial information will include:

  • Name of Your Employer
  • How Long You Have Worked There
  • How Much you Earn Each Month
  • What Debts you Currently Have Outstanding

Step 4: Review Pre-Approval Offer


Once you have submitted the application form, the bad credit auto loan provider will then cross-reference your information with third-party sources. If the lender utilizes a hard inquiry, then a full credit check will be performed. Some lenders allow you to apply via a soft credit inquiry, meaning that the application will not be posted to your credit file.

Either way, if the lender is happy to offer you a loan, you will be able to view your pre-approval terms. This will include the maximum amount that you can borrow and for how long. You will also be able to view your credit terms, such as the APR rate and origination fee. Regarding the latter, this is a fee charged by lenders to cover the costs of organizing the loan.

Step 5: Vehicle Logbook and Bank Account Details

If you are happy to proceed with the pre-approval rates offered by the lender, you will then need to upload some supporting documentation. At a minimum, this will include the logbook of your car or motorbike. If the lender was unable to verify your identity electronically, you might also be asked to upload a copy of your government or state-issued ID.

Next, you will then need to enter your US checking account details. This is where the auto loan funds will be deposited into. Most lenders will also ask you to set up an electronic debit agreement. This allows them to debit your checking account each month to cover your repayments.

Step 6: Sign a Digital Loan Agreement

To complete the auto title loan process, you will need to sign a digital loan agreement. This removes the need to visit the lender in question. Make sure you read through the loan agreement thoroughly before signing it, especially with respect to interest and fees. Once you sign the agreement, the lender will initiate the funding process. In most cases, you should receive your loan funds within 1-2 working days, maybe sooner.

How do I Repay my Bad Credit Auto Loan?

So now that you know how the application process works, you now need to think about how you intend on meeting your monthly repayments. As note above, most bad credit lenders will ask you to set up an electronic debit agreement, meaning that the repayments will be taken from your checking account automatically. This is actually the best option available to you, as it means you will never forget to make a repayment. As such, you’ll avoid the risks of encountering a late payment fee.

With that being said, you might have the option of making your repayments via an alternative payment method. Possible options include a:

  • Money Order
  • Check
  • Debit Card Payment
  • Cash via the Lender’s Store

Am I Eligible for a Bad Credit Auto Loan?

As the name suggests, bad credit auto loans are suited to those of you with bad credit. However, this isn’t to say that everyone will be eligible. For example, the lender will likely ask that you have a regular source of income, and that your debt-to-income ratio isn’t too high. The lender will also stipulate a minimum vehicle value to be eligible.

Below we have listed some of the minimum requirements that you will likely need to meet to be approved for a bad credit auto loan.

Named on the Logbook

Firstly, your name needs to be stated on the logbook of the car or vehicle that you wish to take the loan out against. You will need to verify this by uploading the logbook as part of your application, so make sure that you have it to hand.

Regular Source of Income

You will need to prove that you have a regular source of income. Most auto loan providers prefer applicants that are in full-time employment, although this isn’t always mandatory. Instead, some lenders will consider your application if you’re employed part-time, or your income comes from benefits. The income threshold will be much lower in comparison to a traditional personal loan, not least because you are putting your car or motorbike up as collateral.

Debt-to-Income Ratio

Auto loan providers usually stipulate a maximum debt-to-income ratio requirement. For those unaware, this looks at the amount of debt that you currently have outstanding against your income. For example, if you earn $50,000 per year and you have $10,000 in outstanding debt obligations, your debt-to-income ratio would be 20%.

Historical Relationship With Debt

Although the lender won’t base its decision primarily on your credit score, it will need to assess what your historical relationship with debt is like. By extracting data from your credit file, they will be able to see whether or not you have previously been late with loan repayments or worse, defaulted. If you have fallen behind on your loan repayments on multiple occasions, you might be rejected outright.

Age and State

In most cases, you will need to be aged at least 18 years old to get an auto loan, although some states it can be 19. More importantly, auto title loans are not legal in all US states. Even if you live in a state that does permit auto loans, you might struggle to find a provider if there is a low limit on the amount of interest that lenders can charge. This is because the loan is unlikely to be viable for the lender as they cannot offset the risks of lending money to a bad credit profile with higher APR rates.

How do I Choose a Bad Credit Auto Loan Lender?

Like the sound of an auto loan and want to make an application for financing today? If so, you will need to find a lender that meets your personal needs. With hundreds of providers potentially active in your state, this is no easy feat. As such we would suggest making the following considerings before starting your auto loan application.

1. What LTV Does the Lender Offer?

You will need to evaluate the maximum LTV that the lender is willing to offer. This is to ensure that the lender is able to cover your financing needs.

For example, if your car is worth $5,000 and you need to borrow $3,000, you will need to choose a lender that offers an LTV of no less than 60%.

2. What Interest Rates Does the Lender Charge?

There is no knowing how much you will pay on your auto loan until you actually apply. This is because the lender will base its financing charges on a number of metrics. This includes your current credit score, income, and debt-to-income ratio. With that said, most lenders will list a representative rate.

This is the APR rate that the lender wishes to advertise on its website. Although there is no guarantee that you will get this rate, it should at the very least give you an idea of whether the lender is competitively priced.

3. Does the Lender Need to Inspect Your Vehicle?

Although most auto loan providers allow you to complete the entire application online, some will ask you to bring your vehicle in for inspection. If they do, you’ll need to do this before the lender releases the funds. If the lender in question is based locally to where you live, this shouldn’t be too much of an issue.

However, if you are required to drive across the state to do this, it might be worth considering an alternative lender. Better still, stick with auto loan providers that operate 100% online.

4. How Quickly Will Your Loan be Funded?

In most cases, auto loan providers will fund your application within 1-2 days of the loan being approved. While this is likely to be sufficient for most financing requirements, there might come a time where you need the money even sooner.

If so, you might need to choose a lender that offers same-day financing. Just remember, you might need to pay a premium for this, so be sure to assess how much the same-day loan is going to cost you.

5. What is the Lender’s Policy on Late Payments?

While it is hoped that you will always meet your monthly repayments on time, there is no predicting what the future holds. If you run into financial difficulties and subsequently fall behind on your auto loan, financial consequences are a certainty.

Late payments will usually result in a monetary fine, which will also have interest applied to it. However, if the late payment turns into a default, you stand the very real chance of having your vehicle repossessed by the lender. As such, be sure to assess what the lender’s policy is on late payments before proceeding with your application.


In summary, bad credit auto loans are a great alternative to more expensive financing products like payday loans. This is because you will be putting your car or motorbike up as a security, so lenders are willing to offer you more favorable APR rates. As you now know, the fundamentals of an auto loan operate largely the same as an installment loan. For example, you’ll borrow a fixed amount at a fixed rate of interest, and your repayments will be taken on the same date of each month.

This allows you to budget well, as you’ll know exactly how much you need to put to one side each month. With that being said, your auto loan is secured by your vehicle, meaning that the lender will have the legal remit to seize it if you default. The specific time-frame of defaulting will vary from lender-to-lender, although this is usually based on 90 days without payment. Ultimately, just make sure that you can afford to take an auto loan out before proceeding with an application.

Glossary of Loan Terms


How much can I borrow from a bad credit auto title loan?

What happens if I default on my bad credit auto loan?

How quickly can I get a bad credit auto loan?

Do I need to supply supporting documents when applying for a bad credit auto loan?

Kane Pepi

Kane Pepi

Kane holds academic qualifications in the finance and financial investigation fields. With a passion for all-things finance, he currently writes for a number of online publications.