Best Auto Loans for Bad Credit Customers

Best Auto Loans for Bad Credit Customers

Bad things happen to all of us, that’s just life. Frustratingly, some of us get penalized multiple times and end up stuck: e.g. first we get sick, then we lose our job, then we can’t make our car payments and all of a sudden we end up with bad credit. We may get healthy again quickly and find a new job but the curse of bad credit will follow us for years.

Bad credit is a chicken and egg problem. In order to improve your credit you need to take out loans but if you have bad credit, you’ll have a hard time finding a bank or Credit Union that lends to you. We therefore compiled a long list of Credit Unions that will help you get a loan even if you have relatively bad credit.

Our Loan Calculator Finds the Best Rates

County of residence FICO Term of loan(monthly) Vehicle year Vehicle mileage


Ranking the best Auto Loans for Bad Credit Customers

Different counties and different Credit Unions cater to different credit needs. The table below lists all the California counties, the lowest rate we Credit Unions offer for bad credit customers as well as the name of the Credit Union and a link to contact them:

Alameda County 6.49% Alliance CU www.alliancecu.org
Alpine County 10.79% Golden 1 CU www.golden1.com
Amador County 10.79% Golden 1 CU www.golden1.com
Butte County 10.79% Golden 1 CU www.golden1.com
Calaveras County 10.79% Golden 1 CU www.golden1.com
Colusa County 10.79% Golden 1 CU www.golden1.com
Contra Costa County 6.49% Golden 1 CU www.golden1.com
Del Norte County 10.79% Golden 1 CU www.golden1.com
El Dorado County 6.49% Golden 1 CU www.golden1.com
Fresno County 10.79% Golden 1 CU www.golden1.com
Glenn County 10.79% Golden 1 CU www.golden1.com
Humboldt County 10.79% Golden 1 CU www.golden1.com
Imperial County 10.79% Golden 1 CU www.golden1.com
Inyo County 10.79% Golden 1 CU www.golden1.com
Kern County 10.79% Golden 1 CU www.golden1.com
Kings County 10.24% Golden 1 CU www.golden1.com
Lake County 10.79% Golden 1 CU www.golden1.com
Lassen County 10.79% Golden 1 CU www.golden1.com
Los Angeles County 10.79% Golden 1 CU www.golden1.com
Madera County 10.79% Golden 1 CU www.golden1.com
Marin County 9.49% Golden 1 CU www.golden1.com
Mariposa County 10.79% Golden 1 CU www.golden1.com
Mendocino County 10.79% Golden 1 CU www.golden1.com
Merced County 10.79% Golden 1 CU www.golden1.com
Modoc County 10.79% Golden 1 CU www.golden1.com
Mono County 10.79% Golden 1 CU www.golden1.com
Monterey County 10.69% Golden 1 CU www.golden1.com
Napa County 9.49% Golden 1 CU www.golden1.com
Nevada County 10.79% Golden 1 CU www.golden1.com
Orange County 10.79% Golden 1 CU www.golden1.com
Placer County 6.49% Golden 1 CU www.golden1.com
Plumas County 10.79% Golden 1 CU www.golden1.com
Riverside County 7.97% Golden 1 CU www.golden1.com
Sacramento County 6.49% Golden 1 CU www.golden1.com
San Benito County 10.79% Golden 1 CU www.golden1.com
San Bernardino County 7.97% Golden 1 CU www.golden1.com
San Diego County 7.97% Golden 1 CU www.golden1.com
San Francisco County 9.24% Golden 1 CU www.golden1.com
San Joaquin County 10.79% Golden 1 CU www.golden1.com
San Luis Obispo County 10.69% Golden 1 CU www.golden1.com
San Mateo County 6.49% Alliance CU www.alliancecu.org
Santa Barbara County 6.49% Golden 1 CU www.golden1.com
Santa Clara County 6.49% Alliance CU www.alliancecu.org
Santa Cruz County 10.69% Golden 1 CU www.golden1.com
Shasta County 10.79% Golden 1 CU www.golden1.com
Sierra County 10.79% Golden 1 CU www.golden1.com
Siskiyou County 10.79% Golden 1 CU www.golden1.com
Solano County 9.49% Golden 1 CU www.golden1.com
Sonoma County 9.49% Golden 1 CU www.golden1.com
Stanislaus County 10.79% Golden 1 CU www.golden1.com
Sutter County 10.79% Golden 1 CU www.golden1.com
Tehama County 10.79% Golden 1 CU www.golden1.com
Trinity County 10.79% Golden 1 CU www.golden1.com
Tulare County 10.79% Golden 1 CU www.golden1.com
Tuolumne County 10.79% Golden 1 CU www.golden1.com
Ventura County 6.49% Golden 1 CU www.golden1.com
Yolo County 10.79% Golden 1 CU www.golden1.com
Yuba County 10.79% Golden 1 CU www.golden1.com

 

How can a dealer or a bank take advantage of me if I have bad credit?

Customers with good or great credit typically know what rate they should expect on their car loans: every dealer and lender uses language like “1.99% for great credit” in their ads. No lender or car dealer ever advertises their best rate for a customer with challenged or bad credit: who would find an add that says “only 29% interest for bad credit” appealing?
Therefore, we found that on bad credit customers:
  • rates for loans vary a lot
  • dealers introduce predatory terms, such as early repayment fees, loan fees etc.

You may have challenged or bad credit but the only things that should be different for you are:

  • a higher APR
  • potentially the requirement for a high(er) down payment
  • potentially some term length restrictions
  • potentially a mileage restriction on the car you’re buying

Strangely, bad credit rates are lower in some counties than in others – why?

The rates for customers with bad credit range from e.g. 6.49% in Alameda County through Alliance Credit Union to 10.79% through Golden 1 in a number of other California counties. The 4% difference on a $20,000 loan over 72 months leads to an EXTRA financing charge of $2,529. Commercial banks charge higher rates than Credit Unions and hence the extra financing charge for a bad credit loan will be even higher.

Frankly, these high interest loans are theft: money = money = money, there’s no reason why you should be paying more for the same loan.

However, Credit Unions are not-for-profit organizations and driven by their charter. Local Credit Unions are basically community banks helping members with bad credit get back on their feet. Demographics and credit profiles vary a lot from one county to the next and therefore Credit Unions adjust their rate-sheets to the needs of the local community, which explains why the rates for customers with bad credit may be much more attractive in Alameda County compared to e.g. San Francisco.

We’ve already detailed in great length why Credit Unions typically offer the best auto loans for good credit customers, but its worth examining why these rates vary so much by county or region.

 

Why not buy a new car at 0% if my APR is 10.79%?

Automakers are really good at building new cars. However, counter-intuitively, automakers are not good at selling cars. Advising customers which car to buy requires a very different skills and competencies than making the car. Therefore, automakers work closely with their franchise dealer network to sell their cars to consumers.

That said, predicting demand of a new car remains the task of the automaker and sometimes, automakers do a very poor job. If the automaker overestimates the demand for e.g. a Nissan Leaf, the franchise dealers will find themselves drowning in unsold inventory. In those cases, the franchise dealer requires help from the automaker, which could come in one of three forms:

  1. attractive leasing rates on new car sprovided by the automaker(‘s financing company)
  2. low interest rates for customer loans provided by the automaker(‘s financing company)
  3. other promotions such as cash backs, discounted warranties etc.

In other words, if a franchise dealer has a hard time selling a new car, the automaker creates promotions for customers such as e.g. 0% financing. Therefore, the 0% financing is nothing else than a discount on the actual vehicle, yet not very visible to the customer.

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