Auto loans for all types of credit in February 2022

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If you need to buy a car, an auto loan can help you do that. An auto loan could also be an option if you are looking to refinance an auto loan you already have.

Here’s what you need to know about car loans:

Lenders who offer car loans

There are several types of lenders that offer car loans, each with their own rates and requirements. That’s why it’s important to shop around and consider multiple lenders to find the right loan for your needs.

Here are some of your lender options for auto loans:

Online lenders

Online lenders can be a good option for finding car loans. For example, LightStream, one of Credible’s partner lenders, offers auto loans for new cars, used cars, and classic cars, as well as auto refinance.

An online lender might also be able to get you the money for your car much faster than other lenders. With LightStream, you can have funds deposited into your account the same business day after approval.


Many banks offer car loans at competitive rates. Some also offer rate reductions if you already do business with them. You could also get a discount if you sign up for automatic loan payment.

Keep in mind: Depending on the bank, you may need to be an existing customer to apply for a car loan.

credit unions

Unlike online lenders and banks, credit unions are not-for-profit organizations. For this reason, they sometimes offer a lower APR and better repayment terms on car loans.

You may also qualify for a rate reduction if you sign up for automatic payments.

Keep in mind: You will need to be a member of the credit union to apply for a loan.

Depending on the credit union, you may need to live in a designated area, work in a specific field, or join a certain group to be eligible for membership.

Whichever lender you choose, it’s a good idea to consider how much a car loan will cost you over time. This way you can be prepared for the extra expenses. You can estimate how much you’ll pay for a loan using our personal loan calculator below or check out personalized low interest personal loan rates.

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Learn more: Where to get a personal loan

How to get a car loan in 4 steps

If you’re ready to get a car loan, follow these four steps:

  1. Know your credit score: Your credit score has a major impact on how much you can borrow as well as your interest rate and repayment terms. In the second quarter of 2020, borrowers with good to excellent credit qualified for auto loan rates between 3.24% and 4.21% on average, according to Experian. Borrowers with poor to fair credit qualified for rates between 7.14% and 13.97%. If you have less than perfect credit, you may need to spend time establishing credit or applying to a co-signer.
  2. Compare lenders and choose your loan option: Be sure to compare as many lenders as possible to find the auto loan that’s right for you. Don’t forget to check not only the rates, but also the repayment terms and fees charged by the lender. If you’re buying from a dealership, there may also be in-house financing to consider. After doing your research, choose the loan option that best suits your needs.
  3. Complete the application: You will need to complete a complete application and submit all required documents, such as bank statements, payslips, or tax returns.
  4. Obtain your loan funds: If you are approved, you will need to sign for the loan so the lender can send you the money for your car.

Before taking out a loan, remember to consider as many lenders as possible to find the right one for you.

If you need help financing a car purchase and are considering a personal loan, Credible can help you compare pre-qualified rates from multiple lenders in two minutes.

To verify:

Frequently asked questions about car loans

If you’re considering a car loan, here are answers to some common questions:

How does a car loan work?

A car loan is secured by the car you plan to buy. Because there’s less risk for the lender, you might be able to get a much lower interest rate on a car loan than a typical personal loan, for example. Remember that if you can’t make your payments, you could lose your car.

If you are approved for the loan, the lender will send you the funds for the vehicle or pay the seller directly. You will then have fixed payments each month until the car is paid off. After that, you will get the title of your car and free and clear ownership of it.

Learn more: Fair Credit Personal Loans

Is it better to finance a car directly through a lender or through the dealership?

It depends on whether you can get better terms from a lender or through the dealership. That’s why it’s important to shop around and compare as many lenders as possible to make sure you get the loan that’s right for you.

Although you can apply for an auto loan after you find the car you want to buy, it’s a good idea to apply before you even start looking for a car. This way you will know how much you can afford to spend on a car.

If you’ve been pre-approved for a car loan and are working with a dealership, they might even be able to offer you a lower interest rate or better terms.

To verify: $20,000 loan

Is a 72 month car loan bad?

It’s generally a good idea to choose the shortest loan term you can afford, as you’ll save money on interest charges over time. Also keep in mind that with a long-term loan, your car could lose value faster than you are able to pay it back, leaving you upside down on the loan.

However, a long-term loan might get you a lower payment, which might be better for your budget. You will need to decide which loan term best suits your personal situation.

Can you get auto credit with bad credit?

You will generally need good to excellent credit to qualify for a car loan, although some lenders offer bad credit loans.

Another possible way to get approved for a loan is to apply with a co-signer. Even if you don’t need a co-signer for your loan, having one could help you earn a lower interest rate than you would get on your own.

Read more: 15 car repair loans: find car repair financing quickly

Does applying for a car loan harm your credit?

When you apply for a new loan, the lender will do a hard credit application to review your credit history. For this reason, you may see a short-term drop in your credit score if you apply for a car loan. However, a harsh credit investigation usually only affects your credit for a few months.

Also, if you are approved for the loan and make all your payments on time, you might see an increase in your credit score over time.

If you decide to take out a personal loan for your car purchase, consider considering as many lenders as possible to find the right loan for your needs. It’s easy with Credible – you can see your pre-qualified rates from multiple lenders in two minutes.

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About the Author

Lindsay Van Someren

Lindsay VanSomeren specializes in credit and loans. His work has been published on Credit Karma, Forbes Advisor, LendingTree, etc.

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