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Please Note: Credit Union of Southern California does not offer Membership or loans to non-California residents (other than former CA residents who were already Members or Preferred Partner Members working in out of state locations).

How to Get a Car Loan with Bad Credit

You need a new car and you need a car loan to make it happen, but your credit is less than perfect, now what? 

Buying a car with bad credit is possible. That’s right, even with bad credit you can get a car loan, and one with a somewhat favorable interest rate.
If you don’t need the car right away, you can take advantage of credit-building strategies that can help you improve your credit score and reduce your debt, which will increase your ability to not only get an auto loan, but get one with a more favorable interest rate.
Credit Union of Southern California (CU SoCal) understands that each person has a unique situation and not everyone has perfect credit score.
If you need to purchase that car right away, you’ve come to the right place for car loans for people with bad credit. You always have financing options with CU SoCal. We have years of expertise helping people interested in buying a car with bad credit.
In this post, we’ll share some tips on how to get a car loan with bad credit.
CU SoCal has been providing financial services, including car loans for people with bad credit, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County for over 60 years, and is the fastest growing credit union in Southern California. Please note we do not offer Membership or loans to non-California residents (other than former CA residents who were already Members or Preferred Partner Members working in out of state locations).
Call 800.249.2328 today to schedule a no-obligation consultation with one of our auto loan experts.

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Why Credit Matters

Credit is a central part of the loan application process, especially when it comes to bad credit auto loans and bad credit car leasing. All lenders, including credit unions and banks, use the loan applicant’s credit payment history and credit score to determine the individual’s ability to repay the loan.
Your credit payment history is recorded in a report which is maintained by credit bureaus. You will have a credit report on file at a credit bureau if you have ever applied for a credit card, a personal loan, insurance, or a job. Your credit report contains information about your income, debts, and more.
A credit scoring system awards points for each factor, such as one-time payments and length of credit history, which helps predict who is most likely to repay a debt. The most widely use credit scores are FICO® scores, developed by Fair Isaac Company, Inc. Credit scores range between 350 (high risk) and 850 (low risk).
Not only is credit directly linked to eligibility to borrow, it plays a role in the interest rate you’ll pay on any type of loan — including auto loans and mortgages.
If your credit score is low, you are considered high-risk to lenders, and will likely pay a higher interest rate on a loan as a form of “protection” to the lender, in case you default on payments. Bad credit car loan interest rates are higher, but you can still purchase a car.
Conversely, a high credit score tells lenders you have a good credit history, meaning you pay your debts on-time, thus making you a low-risk applicant, and you will be rewarded with a lower interest rate on your loan.


Other Factors

While examining your credit score starts the loan process and is used to determine overall loan eligibility, other factors including your income and current debt, and the age of vehicle also factor in to qualifying for a loan and getting a favorable, low interest rate.
Now, let’s take a closer look at these three factors affecting credit:



  • Minimum Income Requirement: All lenders require you to make a certain amount every month. While it can vary, the typical monthly minimum income requirement many special finance lenders have is $1,500 to $2,000 before taxes are taken out.
  • Debt to Income (DTI) Ratio Requirement: This is the percentage of your monthly pre-tax income that's dedicated to paying all your bills. To find it, add up all of your monthly bills (the estimated car and insurance payment, other loan payments, rent/mortgage, credit card payments, etc.) and divide the sum by your monthly income. The DTI limit for most lenders is usually around 45 to 50 percent.
  • Payment to Income (PTI) Ratio Requirement: The PTI ratio is the percentage of your income that goes toward your car loan and insurance payment, found by dividing the estimated sum of those two by your gross monthly income. Typically, lenders cap your PTI limit at somewhere between 15 to 20 percent.


The total amount of debt you have, compared with your income, is called your debt-to-income ratio, and it can be a factor in whether lenders agree to give you additional credit.
The credit reporting agency, Experian, states that, generally, a ratio below 40% is considered good. So if your monthly gross income is $4,000, for example, then your monthly debt expenses should be less than $1,600.


Age of Vehicle

Finally, the age of the vehicle will also affect the terms of the loan; however, with average lifespan of cars increasing, financing an older car is becoming less of an issue.


Getting a Car Loan with Bad Credit

CU SoCal works with members looking for bad credit auto loans and auto loans for bad credit, because we know you’re more than a credit score.
To get you on the road to a new car, here are recommended steps for buying a car with bad credit:


1. Check Your Credit Report

Checking your credit will help you see what accounts or debts may be bringing your score down. It’s also important to review your report for errors, which you can dispute and get corrected if the error is found to be legitimate.
Under federal law you are entitled to a free copy of your credit report once every 12 months from each Credit Reporting Agency (also called a Credit Bureau).
To request your credit report, visit During these times of COVID-19, Equifax®, Experian™, and TransUnion® are offering free weekly online reports through April 2021.
Or, you may contact each of the three major credit bureaus:
Equifax: 800-685-1111 (option 3)
Experian: 888-397-3742
TransUnion: 800-916-8800 (option1)
If you find an error on your credit report you have a right to dispute the inaccuracy. It does not cost anything to dispute mistakes or outdated items on your credit report and you don’t need to hire a credit repair company to do this for you. Simply contacting the credit bureau may resolve inaccuracies and may result in a credit score increase.


2. Create a Budget:

Based on your income and your debt, determine what you can comfortably afford for a monthly car payment.
In general, your purchase price should be less than what you’re actually approved for because you’ll need to reserve about 10% of the loan amount for taxes and fees. You’ll also want to consider down payment and trade-in amounts that offset the purchase price.
Remember to budget for insurance as well. Your insurance premium may be different than what you currently pay, as it will be based on the year, make and model of the new car, as well as the safety features it has, such as number and location of airbags, automatic seatbelts, and whether it has a backup camera, for example.
Bad credit car loans make it possible for just about everyone to get a car, but be aware that paying your loan on-time is serious business and requires discipline and responsibility.
To calculate your monthly payment, please check out our vehicle loan calculator.

Once you have an idea of what you will be able to afford to pay each month for your bad credit auto loan, test your budget by setting the projected loan amount aside each month in your savings account. This is good practice, as it shows you if you have the right target budget. If you find you are struggling to pay your other bills each month, you’ll need to lower the amount you planned to spend on the car purchase.


3. Save for a Down Payment

Putting aside the anticipated monthly car and insurance payments is a great way to start saving for the down payment. It’s exciting to see the money adding up!
The more money you can save for the down payment, the lower the loan amount you’ll need, and the less you’ll end up paying in interest over the life of the loan. We recommend saving the largest down payment that you can!


4. Consider Having a Co-Signer on the Loan

Bad credit auto loans and bad credit car leasing can be easier to get if you apply with a co-signer. Having a co-signer means both parties will share the responsibility of the debt.
While the primary signer is responsible for making payments, the loan will appear on both the primary and co-signer’s credit history. Having a co-signer on the loan will help the primary borrower build their credit score (as long as you continue to make on-time payments). For this reason, young adults buying their first car can benefit from having a parent as a co-signer, especially if the parent has good credit.
The co-signer should be fully aware that because the debt is in their name too, they are responsible for repaying the loan or debt balance, should the primary signer default.


Get Pre-Approved Before Test Driving

Knowing your buying power before you start to shop will help you choose a car you can afford and put you in the best position to negotiate a price that you’re comfortable with. With a pre-approval in your hand, car dealers will see you as serious shopper.


CU SoCal Auto Loans

Membership has its advantages! At CU SoCal, our members have access to a wide range of loan options and that includes Car Loans for people with bad credit.
We understand you’re more than a credit score, which is why CU SoCal lends on character and not just on credit scores. If you’ve been turned down for an auto loan because of a low credit score, or need help buying a car with bad credit, we can help.

Please note CU SoCal does not offer car loans to individuals with FICO scores below 600, nor to non-California residents (other than former CA residents who were already Members or Preferred Partner Members working in out of state locations).
Our friendly, knowledgeable loan representatives will listen to your story and look beyond your credit score to help you find the car of your dreams, even if you have bad credit.


Apply For A CU SoCal Auto Loan Today!

CU SoCal is Southern California's No. 1 choice for auto loans and other top-notch banking products.

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Credit Union of Southern California (CU SoCal) is a leading financial institution empowering those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County to reach their goals and build strong financial futures. CU SoCal provides access to convenient money management services and offers competitive rates and flexible terms on auto loans, mortgages, and VISA credit cards—turning wishing and waiting into achieving and doing.


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