If you have bad credit and need to finance a vehicle purchase, you may be worried about facing an exceptionally high interest rate. However, depending on your credit history and score, this may not be the case.

Of course, with a lower credit score, it is unlikely that you will receive a prime interest rate on your loan. But the terms assigned to bad credit car loans can vary. And even though you won't get the best rate available, you can still get a better rate by following a few tips.

How Interest Rates Can Vary on Bad Credit Car Loans

Bad Credit Car Loan

Interest rates assigned to loans are largely based on risk. This is why borrowers with bad credit normally pay more in interest charges than their good credit counterparts. If your credit history shows that you've had problems with credit in the past, you pose a bigger risk to a lender.

According to Bankrate.com, as a group, non-prime and subprime borrowers, on average, pay somewhere between 10% and 13% in interest on their bad credit auto loans. And depending on the lender and borrower's situation, some buyers pay less and others pay much more.

For example, if your bad credit can be traced to a single event, such as a bankruptcy due to a failed business venture, a lender may see you as less of a risk. This is especially true if you have a solid car payment history.

In fact, you could end up paying less in interest than another buyer with the exact same credit score. Why? This other buyer could have bad credit because of habitual late payments and possibly repossession. This type of situation would most likely seem very risky to a potential lender, and the assigned interest rate would reflect this high risk.

This is why you should never assume the worst when applying for a car loan with bad credit. This is also why you should know exactly where you stand with your credit situation before starting the application process.

How to Minimize Interest Charges on a Bad Credit Car Loan

Knowing exactly how bad your credit is can help you get a better interest rate. Also, being informed about the auto loan process in general may help you save money in interest charges no matter what kind of rate you're assigned.

  • Check your credit report and score. You are entitled to one complimentary copy of your report every 12 months from each of the primary reporting bureaus. If you go to AnnualCreditReport.com, you can request reports from TransUnion, Experian and Equifax. For a small fee, you can also gain access to your credit score through any of these agencies. Or, you can check with your bank or credit card provider to see if they offer free credit scores as a courtesy.
  • Provide a down payment. With a decent-sized down payment, you can reduce the amount that you need to borrow. This means that you won't have to pay as much in interest charges over the life of this smaller loan.
  • Watch out for add-ons. Any "extras" purchased from a dealer can be rolled into your car loan. And while this may seem convenient, you will have to pay interest on anything that is included in your auto loan. Also, you may be able to purchase these products elsewhere for less. It definitely doesn't hurt to shop around.

Finally, it's easier to get approved for a bad credit car loan when you have the right kind of assistance.

Auto Loan Assistance for Bad Credit Car Buyers

Auto Credit Express has been helping car buyers with credit issues for nearly two decades. And we'll do everything we can to get you a better chance at auto loan approval. For no charge, we can match you with a dealership in your area that can work with your situation.

Applying with us is obligation-free and our process is fast. This means that you won't waste time when it comes to getting back on the road. Go ahead and fill out our simple and secure online application to get started today.