When you have bad credit, you’re likely to only qualify for a higher than average interest rate on a car loan. However, being prepared is one key for auto loan success, and you can get ready by researching the average rates available to people in your credit score range.

Average Interest Rate for Bad Credit Car Loans

Car loan interest rates are primarily based on your credit score. Generally speaking, the higher your credit score is, the lower the interest rate you can qualify for. The opposite goes for borrowers with lower credit scores.

A credit score isn’t the only factor that influences your interest rate, however. The national prime rate, the lender you’re working with, the vehicle you're financing, how long of a loan term you choose, and more can also impact what's available to you.

According to Experian's State of the Automotive Finance Market report from the third quarter of 2021, the average bad credit auto loan interest rates on used vehicles are:

 Credit Score Range 

 Experian Classification 

 Average Used Car Interest Rate 

300 - 500

Deep Subprime


501 - 600



601 - 660



How Your Interest Rate Affects Your Auto Loan

When you’re dealing with the higher interest rates that come with less than good credit, it can really bump up the cost of the car you’re financing. This is because interest accrues daily based on the balance of your auto loan. The higher the interest rate, the more you’re going to pay in interest charges.

Let’s look at an example of how the interest rate you qualify for impacts the overall cost of your car loan. Say you took out a $15,000 loan with a term of 72 months (six years). Check out the difference in total cost between a 19.85% interest rate and a 9.77% interest rate:


 Monthly Payment 

 Interest Paid 

 Total Cost 

19.85% Interest Rate




9.77% Interest Rate




In this example, we’re using a loan term that’s becoming increasingly popular due to the rising cost of auto financing. A longer loan term lowers the monthly payment but raises the overall cost of your loan.

Since you’re likely to see these higher rates with poor credit, one way you can lower the overall cost of your car loan is by opting for a shorter loan term. If we assume the same $15,000 financed but use a 60-month loan term, you save money overall by lowering the interest charges. The shorter your term, the fewer interest charges you're going to pay.

Ways to Minimize Your Interest Charges

Besides shortening your loan term, there are several other ways where you could save money in interest charges. Here are three suggestions:

  1. Average Interest Rates for Bad Credit Car LoansMake a down payment – Down payments make a difference in the amount you pay in interest charges. When you make a down payment, you’re reducing the amount of your loan right from the start, which means there’s a lower balance on which interest can be charged.
  2. Stay off the “trade-in treadmill” – When you trade in a vehicle with negative equity, a lender may allow you to roll negative equity from your previous loan into the new one. This increases the amount of the new loan, leaving you with a bigger loan balance on which interest can be charged. It also has the potential to keep your new car upside down in the loan for longer, which means you could face additional negative equity with your next trade-in. The cycle continues, leaving you paying even more in interest charges than necessary every time you finance a new vehicle.
  3. Pay off your loan faster – A surefire way to save money in interest charges is to reduce the amount you owe on the loan. The faster you can reduce your auto loan balance, the more money you save. There are a number of methods you can use to pay off your loan faster, including paying more when you can, payment splitting, or making bi-weekly payments.

Bad Credit Isn’t Standing between You and a Car Loan

Just because you have bad credit doesn’t mean you can't get a car loan. You should be prepared for a higher interest rate, but you can always reduce interest charges using the above strategies.

The good news is that you can get an auto loan and improve your credit score at the same time. Auto Credit Express can match you with a local dealership that knows how to work with bad credit.

We work with a nationwide network of special finance dealers that have the lending resources to finance people in unique credit situations. Fill out our free, no-obligation auto loan request form, and we’ll put our expertise to work for you.