Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Sep 12, 2011

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Each year, over 20 million car financing arrangements are made and signed – and not all buyers go through the process with excellent credit. Securing a car loan with bad credit, no credit or after a bankruptcy may be more challenging than doing so with a high credit rating. As a result, certain advertised incentives such as low interest rates during special sales may be unattainable. A less than perfect score, however, doesn’t eliminate the opportunity for auto financing.

A credit report is one of the key components of an auto loan interest rate, though other factors such as where the vehicle is purchased, whether the vehicle is used or new and overall market rates also influence a final financing offer. Consumers with bad credit may wish to use these factors to their advantage to offset the higher interest rates associated with poor credit.

The source of financing is also important for car buyers with bad credit hoping to secure reasonable interest rates. Car dealerships often work with a number of local lenders and financial institutions, and may offer a few different loan possibilities during purchase. Such offers are typically marked up by the dealership, however, and may not be able to compete with rates available from local credit unions or online financing services.

In fact, buyers may be able to obtain small interest discounts when taking out an auto loan from a bank or other institution where they already have membership. Bad credit auto loans may carry higher interest rates as a general rule, but buyers are increasingly accepting poor rates upon initial purchase and choosing to refinance when circumstances have improved.