Depending on your lender, you may be able to make a car payment with a credit card. But not only is this uncommon, due to the fees that it would place on the lender, there are also other reasons to think twice before you go this route if it’s available.

You could end up paying credit card interest on the transaction and get hit with a fee, making your car payment even more expensive. And, on top of the added costs, racking up debt on your credit card could lower your credit scores.

Let’s take a look at some ways you might be able to make a car payment with a credit card, as well as the associated drawbacks.

How can I use a credit card to make my car payment?

Whether you can make a car payment with a credit card depends on your lender. Some only accept certain payment methods, such as checks, debit cards, electronic checks or fund transfers from a bank account, or money orders. Others accept credit cards, but they may require you to make the payment through a third-party payment processing company that charges a transaction fee.

There are other ways you may be able to make a car payment with a credit card, but they could cost you.

Cash advance

A cash advance — borrowing money against your credit card’s limit — is another way you can use your credit card to make a car loan payment. You can get a cash advance several ways, including withdrawing cash at an ATM or a bank branch. Keep in mind that if you use an ATM, you might be charged an ATM fee. And with a cash advance, your credit card issuer will likely charge a cash advance fee and a higher interest rate than it would on purchases.

Money transfer

Some lenders accept payments through money transfer services such as Western Union or MoneyGram. You may be able to fund the transaction using a credit card, but keep in mind that your credit card issuer may treat it as a cash advance. That means you’d be subject to credit card interest and cash advance fees on top of any fees charged by the money transfer service.

These costs can add to your loan payment

The costs associated with using a money transfer service or getting a cash advance can add up. Let’s say your monthly car loan payment is $300. You decide to use a money transfer service to make your payment, and the service charges a transfer fee of $21.50. Your credit card issuer treats the transaction as a cash advance and charges a cash advance fee of $10 or 3% of the transaction, whichever is greater. That means you’d end up paying an estimated $331.50 — an additional 10.5% of your monthly car loan payment, plus interest — on your cash advance if you don’t pay the full amount before the next billing period.

Drawbacks of making a car payment with a credit card

In addition to the potential fees and cash advance interest charges, paying your car loan with a credit card can come with other drawbacks.

Additional interest charges

Using a credit card to make a car loan payment could mean you pay two types of interest charges. Unless you have a 0% APR on your car loan, your car payment will include a mix of principal (the amount you borrowed to buy your vehicle), interest and any loan charges. If you use a credit card to make a car loan payment and make the minimum payment — versus paying your credit card balance in full by the next payment due date — you’ll end up paying credit card interest on the transaction as well.

If you make a car payment with a credit card, another way to avoid interest charges is by using a card with an introductory 0% APR offer and paying the balance in full before the intro period ends.

May negatively affect your credit scores

Putting one or more car loan payments on a credit card can increase your credit utilization, or how much of your available credit you’re using. This number factors heavily into many credit scores, and a high ratio can negatively affect your scores. It’s generally a good idea to use as little of your credit as you can — experts recommend that you aim for using less than 30% of your total credit limit.

Next steps

It’s unlikely that you will be able to make your car payment with a credit card. And even if you can, making a car payment with a credit card could end up being an expensive move and should be avoided, if possible.

If you don’t have enough cash in hand to make a one-time car payment, consider asking a friend or family member if you can borrow the money. Even if they charge you interest on the loan, you may be able to pay less in interest than if you made the payment with a credit card.

But if you find that you’re struggling to come up with the cash for your car payment each month, here are a couple of things to consider.

• Reach out to your lender. Your lender may be willing to renegotiate your loan terms, defer your payment or offer other forms of financial assistance.
• Refinance your auto loan. You might be able to get a lower interest rate or lower monthly payments that could make your loan more affordable.

Hear from our editors: How to compare car insurance rates

Updated April 28, 2023

This date may not reflect recent changes in individual terms.

Editorial Note: Intuit Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. Information about financial products not offered on Credit Karma is collected independently. Our content is accurate to the best of our knowledge when posted.

Written by: Rebecca Giantonio Moran

Before you buy an auto insurance policy, it’s a good idea to compare rates from car insurance providers. Doing so can help you find the best policy to fit your coverage needs and financial situation.

There are several ways to compare car insurance rates. While many insurers offer free car insurance quotes on their websites, you can also use third-party online comparison tools or work with an insurance agent.

Here are some steps to help you find an auto insurance policy with your budget in mind.

• Gather some information to get a car insurance quote
• Identify the types of auto coverage you need
• Determine how much car insurance coverage you need
• Get and compare car insurance quotes
• How much should I be paying for car insurance?

1. Gather some information to get a car insurance quote

To get a car insurance quote, you’ll need to give some information to the provider. Here’s what you’ll typically need to share.

• Personal information — Insurers usually ask for your address, ZIP code, date of birth and coverage start date.
• Vehicle details — These details may include the vehicle’s make, model and year; whether it’s paid off, leased or financed; and how the car is used.
• Driving history — Insurance companies may ask how many violations or tickets you’ve had within a specific time frame, as well as when you first received a driver’s license.

These details are among the factors that affect your insurance rate or the types of coverage you may need. Be aware that some companies may run additional checks for other information, such as your driving record, credit history and past insurance claims, before providing a quote.

2. Identify the types of auto coverage you need

The car insurance coverage you need depends on a number of factors, like where you live and whether you lease or finance your vehicle. Before you buy a policy, be sure to check with your state department of insurance to find out what coverage is required in your state.

In general, there are six common types of auto insurance that may be included in your policy, and we’ve covered them below. But there are a range of optional coverages beyond these six types, such as rental reimbursement or towing and labor coverage.

The types of coverages available vary by insurer. If you’re looking for unique coverage options, it may help to search for insurers that specialize in these offerings.

Liability insurance

Liability coverage is required in every state except New Hampshire and Virginia. If you live in Virginia and choose to forgo liability insurance, you must pay an uninsured motor vehicle fee.

This type of insurance usually includes two separate types of coverage — bodily injury liability coverage and property damage liability coverage — both of which can protect you financially against other people’s claims if you cause an accident.

Uninsured or underinsured motorist coverage

Your liability insurance may also include uninsured or underinsured motorist coverage. This type of insurance pays you if you’re injured in a hit-and-run accident or by a driver who either doesn’t have liability insurance or doesn’t have enough to cover your damages. Uninsured motorist coverage is required in 21 states and the District of Columbia.

Comprehensive insurance

Comprehensive coverage helps cover damage to your car resulting from a non-collision event such as theft, vandalism, fire, falling objects or damage caused by an animal. Comprehensive insurance is optional, though your lender may require it if you finance or lease your car.

Collision insurance

Collision coverage is optional. But like comprehensive coverage, it may also be required by the lender if you lease or finance your vehicle. This type of insurance helps pay for damage to your car resulting from a collision with another car or an object like a fence or tree.

Personal injury protection

Personal injury protection, or PIP, is required in states with no-fault laws. In these states, each driver files a claim with their own insurance company following an accident, regardless of who is at fault.

PIP coverage can help foot the bill for your (or your passengers’) medical costs after an accident. It may also help cover costs related to the accident, such as lost wages and funeral expenses.

Medical payments coverage

Similar to PIP, medical payments coverage can help pay for medical and funeral expenses for you or your passengers. Medical payments coverage may also cover your costs if you’re hit by a car as a pedestrian. An alternative to PIP, this type of insurance is usually optional and available in some states that aren’t no-fault states.

3. Determine how much car insurance coverage you need

Failing to buy enough auto insurance could put you at financial risk, but purchasing too much coverage could put unnecessary strain on your wallet. To figure out how much coverage to buy, consider factors like your state’s coverage requirements, your assets and other insurance, and your vehicle.

Your state’s coverage requirements

Each state has its own requirements for the minimum amount of liability coverage you need to buy. If your state requires other coverage like uninsured motorist, PIP or medical payments coverage, you’ll also want to find out what the required minimums are for those types of insurance. Check with your state department of insurance or state transportation agency to find out.

The lower your coverage limit, the lower your car insurance premium will be. But be aware that your state’s required coverage limits — the maximum amount your insurance company will pay on an approved claim — may not adequately protect your finances. Before you opt for the minimum coverage, consider your assets and other insurance.

Your assets and other insurance

When choosing car insurance coverage limits, think about the value of your assets, such as your home, savings and investments. These assets could be at risk if you settle on your state’s minimum coverage limits and later cause a major crash or are sued after an accident. If the resulting expenses are higher than your coverage limits and you don’t have the cash to pay the difference, you might have to tap into your assets.

It’s also a good idea to consider your health insurance and disability insurance when choosing a PIP or medical payments coverage limit. Combined with the coverage these policies provide, your state’s minimum requirement may be enough to protect you.

Your vehicle

If your lender or leasing company requires comprehensive and collision coverage, or you want to buy these types of coverage to protect a newer vehicle or expensive model, your coverage limit for each of these policies is typically the actual cash value — or current market value — of your car.

But you’ll still need to choose a deductible for each type of coverage. A deductible is the amount of money you’ll be responsible for paying before your auto insurance kicks in on an approved claim. Common deductible amounts are $250, $500 and $1,000. In general, the lower your deductible, the higher your premium will be. When choosing a deductible, weigh how much you could realistically pay out of pocket against how much premium you can afford.

4. Get and compare car insurance quotes

Once you’ve gathered your personal and vehicle information and have a sense of what types of coverage — and how much —you need, you can begin gathering and comparing quotes from multiple insurance companies.

As you review the quotes, ask yourself these questions.

• Do all the quotes feature the same types and levels of coverage? If one quote includes only the minimum liability coverage required by your state while another contains a higher coverage limit, you’ll likely see a big difference in rates.
• Are the deductibles the same across your quotes? If you plan to buy comprehensive or collision coverage, make sure that each quote features the same deductible for each type of insurance. Otherwise, you aren’t comparing apples to apples. If one quote has a $250 deductible for comprehensive coverage and the other has a $500 deductible, the first quote will likely have a higher premium.
• Do the quotes include any discounts you’re eligible for? Check to see if each quote includes discounts offered by the insurer that you qualify for. Discounts vary across insurance companies and may be based on your driving history, certain groups or organizations you belong to, customer loyalty or your vehicle’s safety features. It’s common to see discounts for safe drivers, good students, cars with anti-theft features and more. You may also be able to save on car insurance by bundling your auto policy with other policies, such as renters or homeowners insurance.

Once you’ve confirmed that each quote has the same types of coverage, limits and deductibles, you can complete your rate comparison and identify the car insurance policy that works best for you and your finances.

How much should I be paying for car insurance?

The average U.S. driver is paying $1,529 for auto insurance in 2021, according to The Zebra’s 2022 The State of Auto Insurance report. But keep in mind that a range of factors, including where you live, the coverage you choose, the car you drive, your driving history and routine, your age and — in some states — your credit, can affect your auto insurance rate.
 
While some of these factors may be out of your control, shopping around and comparing auto insurance quotes can help you find the best car insurance rate for your needs.

To give you an idea of average rates, this table shows the average annual premium by state for liability coverage alone and liability coverage combined with comprehensive and collision insurance in 2020. The information in the table comes from the National Association of Insurance Commissioners’ Auto Insurance Database Report 2019/2020, released in January 2023.

AutoGravity has shut down its car-shopping and auto loans platform. The good news is that there are other online lending platforms out there that can help you shop for financing by matching you with prospective lenders.

We’ve rounded up four possible alternatives that offer benefits — like a wide range of loan options, the ability to shop for a car and loan in one place, and a willingness to consider people with bad credit — to help you in your search for an auto lender that’s right for you.

• Auto Credit Express: Good for people with bad credit
• MyAutoLoan: Good for a range of loan options
• Autopay: Good for wide loan amount range
• RateGenius: Good for refinancing

Auto Credit Express: Good for people with bad credit

Why Auto Credit Express stands out: Lenders within the Auto Credit Express platform consider people across the credit spectrum, just as AutoGravity did when it offered financing. Some dealers within the Auto Credit Express network even work with people who have declared bankruptcy or had a car repossessed in the past.

Here are more details about Auto Credit Express.

• Large dealership network — Auto Credit Express partners with more than 4,000 dealerships across the U.S. to offer new- and used-car financing. But depending on where you live, you may have limited options in your area.
• Buy-here, pay-here dealerships — Some car dealerships in the Auto Credit Express network offer in-house financing. These buy-here, pay-here dealerships often charge much higher interest rates than other lenders. Before signing any loan paperwork, make sure you’ve compared all your loan options and understand the loan terms.
• Loan requirements — Requirements to qualify for a loan vary among dealers in the Auto Credit Express network. But Auto Credit Express lists some key requirements: You must be at least 18 years old, have a valid driver’s license and be a legal resident of the United States. The company also notes that if you have bad credit, you may need to have $1,500 to $2,000 of monthly pretax income, six months on a qualifying job with at least three years of employment history, proof of residence, a phone bill and personal references.

Read our Auto Credit Express review to learn more.

MyAutoLoan: Good for a range of loan options

Why MyAutoLoan stands out: MyAutoLoan offers a range of loan options through its lending network, including loans for new vehicles, used vehicles, private-party purchases, lease buyout and refinance. Like AutoGravity previously did, MyAutoLoan matches people with potential lenders after you complete an online application. From there, you can choose the lender that best fits your needs.

Here’s more information about MyAutoLoan.

• Available in 48 states — MyAutoLoan doesn’t do business in Alaska or Hawaii.
• Considers people with lower credit scores — Lenders in the MyAutoLoan network require credit scores of 600 or higher.
• Income requirements — The company notes on its website that a minimum income of $21,600 is a general requirement for a purchase, private-party or lease buyout loan. The minimum for a refinance loan is $18,000.
• Minimum loan amounts — The minimum loan amount is $8,000 for a car purchase or lease buyout loan and $5,000 for a refinance loan. This may make MyAutoLoan a non-option if you plan to buy an older, lower-priced used car.

Read our MyAutoLoan review for more details.

Autopay: Good for wide loan amount range

Why Autopay stands out: Autopay offers loans for new cars and used cars, lease buyout loans and refinancing (both cash-out and traditional) through its nationwide network of credit unions and other financial institutions. In addition to a range of auto loans, Autopay also offers a wide loan amount range — from as little as $2,500 up to as much as $100,000 (terms may be different when you apply through Credit Karma). This low minimum loan amount could be ideal if you only need to borrow a little money or plan to finance an inexpensive used vehicle.

Here are some more things to know about Autopay.

• Ability to apply for prequalification — Submitting an online application will result in a soft inquiry that won’t affect your credit scores. Once you choose a lender, Autopay will run a hard inquiry, which can lower your scores. Remember that prequalification for an auto loan isn’t a guarantee you’ll be approved for the loan or the estimated rate or loan terms. You’ll need to submit a formal application to the lender (triggering a hard inquiry) and, if you’re approved, your loan rate and terms may change.
• Competitive rates — Autopay’s starting annual percentage rate, or APR, for people who qualify is lower than what many banks and credit unions offer.
• Considers people across the credit spectrum — Lenders in the Autopay network work with people with all credit profiles, including those who are rebuilding their credit.

Check out our Autopay auto loans review to learn more.

RateGenius: Good for refinancing

Why RateGenius stands out: If you’re interested in refinancing your current car loan to get a better interest rate or lower your monthly payment, RateGenius can help do some of the heavy lifting for you. If you’re approved after you submit an application, RateGenius will work with its network of more than 150 lenders to find the best interest rate and loan terms you qualify for.

And once you sign your new loan agreement, RateGenius will pay off your old auto loan balance and transfer the title from your former lender (if that’s who holds it) to your new lender.

A couple more details about RateGenius.

• Potential fees — RateGenius says there may be “prepaid finance charges” in some cases, and there may be fees charged by the DMV, depending on your loan and state.
• Proof of income required — You’ll need to provide proof of steady household income during the application process. If you don’t meet income requirements, you may be able to include a co-applicant who meets the requirements.

Read our RateGenius auto refinance loan review to learn more.

How we picked these alternatives

We considered a number of factors when choosing AutoGravity loan alternatives. We started by looking at other auto financing platforms that help match people with potential lenders. We then identified those with similar features to what AutoGravity offered. These features include considering people with less-than-perfect credit, the ability to shop for a car in the same place you apply for a loan, and availability across the United States. 

Updated October 26, 2021

This date may not reflect recent changes in individual terms.

Editorial Note: Intuit Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. Information about financial products not offered on Credit Karma is collected independently. Our content is accurate to the best of our knowledge when posted.

Written by: Rebecca Giantonio Moran

Pros

• In-person customer service available
• Potential interest rate discounts 

Cons

• Limited availability of direct auto loans
• No ability to apply online for prequalification or preapproval
• Very little loan information on website

What you need to know about Fifth Third Bank auto loans

Fifth Third Bank is a large regional bank based in Cincinnati with more than 1,100 branches across 10 states in the Midwest and Southeastern United States. The bank offers auto loans directly to bank customers with eligible checking or savings accounts who live in one of those states. It also offers indirect auto loans through car dealerships in 45 states. 

Limited loan options

With a Fifth Third Bank auto loan, you can finance a new or used car purchase from a dealership or refinance an existing car loan. The bank doesn’t offer private party or lease buyout loans.

Potential interest rate discounts

Fifth Third Bank offers two opportunities to earn a 0.25% interest rate discount on your loan. You can qualify for a 0.25% discount by setting up automatic payments from a Fifth Third checking account or by refinancing an auto loan from another lender.

If you’re a Fifth Third Preferred or Enhanced checking customer who qualifies for waived monthly service fees when you take out a Fifth Third Bank auto loan, you may also qualify for a rate discount of 0.25%. 

Limited loan information on the website

Fifth Third Bank has limited information about its auto loans on its website. The bank doesn’t provide rate tables, loan amounts, loan term options, vehicle financing restrictions or other important information you’ll need to determine whether it provides better rates or terms than other financial institutions. 

The bank does feature a handy online loan calculator that you can use to estimate a monthly payment based on a loan term, interest rate, purchase price and down payment that you specify. But the output is only an estimate and not a guarantee of whether you’ll be approved or what rate and terms you’ll receive. 

A closer look at Fifth Third Bank auto loans

Before you take out a Fifth Third Bank auto loan, here are some more details to consider.

• Not available in most states — Fifth Third Bank has branches in only 10 states: Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, North Carolina, Ohio, Tennessee and West Virginia.
• Grace period — Fifth Third may provide a grace period if you need more time to make your auto loan payment but don’t want to get hit with a late fee.
• Delayed payments for refinance loans — If you get a refinance loan, you may not need to make your first payment for up to 90 days. But be aware that interest on your loan will continue to accumulate during that 90-day period.

Is a Fifth Third Bank auto loan the right fit for you?

A Fifth Third Bank auto loan may be a good option if you’re already a bank customer and qualify for one of its loan rate discounts. But you’ll need to call or head into a Fifth Third Bank branch just to apply and see what rate and terms you may qualify for. If you’re planning to shop for an auto loan online so you can compare potential rates and terms more easily, Fifth Third Bank probably isn’t a good fit.

You might also want to look elsewhere if you have lower credit scores. The bank’s 2019 annual report filing with the Securities and Exchange Commission shows that most auto loans issued in 2019 went to people with FICO® credit scores higher than 690.

How to apply for a loan from Fifth Third Bank

To apply for a direct loan from Fifth Third Bank, you’ll need to head into a branch or call 1-866-53-LOANS.

Before you decide to apply for an auto loan with Fifth Third Bank or any other lender, check your credit to understand your scores. Knowing your credit scores can help you identify which lenders may be more likely to work with you and help set your expectations. In general, lower credit scores will result in higher interest rates. 

It’s also a good idea to shop around and compare other loan offers so that you can find the best loan rate and terms for your needs. Our article on how to get a car loan provides more tips and information on the process.

Not sure if Fifth Third Bank is right for you? Consider these alternatives.

• Capital One Auto Finance: Capital One may be a good choice if you want the ability to apply for prequalification. Just remember that prequalification isn’t a guarantee of loan approval, and your rate and terms may change after you submit a complete application.
• LightStream auto loan: LightStream is worth considering if you want to finance a car purchase from a private seller.

Citizens One — the lending division of Citizens Bank — only offers auto loans through some car dealerships. If you want to shop around for a car loan before you arrive at the dealer, there are other large banks that provide auto loans directly to consumers through their branches or online.

Whether you’re looking for the ability to apply for prequalification, a specific type of auto loan, help finding a car or a range of loan term options, we’ve rounded up some alternatives to Citizens One.

• LightStream: Good for a wide range of loan options
• Capital One Auto Finance: Good for ability to apply for prequalification
• Chase: Good for flexible loan options
• U.S. Bank: Good for competitive new- and used-car rates

LightStream: Good for a wide range of loan options

Why LightStream is a good alternative: LightStream, which is an online division of Truist Bank, offers loans for new and used vehicles, along with a range of other loan options. These include used cars bought from private parties, refinance loans, classic car loans, lease buyout loans, and motorcycle and RV purchase and refinance loans.

Here are some more things to know about LightStream auto financing.

• Targets people with strong credit — LightStream notes on its website that its customers tend to have several years of credit history with a mix of account types, demonstrate an ability to save based on their assets, have stable income and a history of on-time payments. People with the most solid credit may qualify for LightStream’s unsecured auto loan, which has lower rates than its secured loans.
• No-fee promise — The lender doesn’t charge any fees or prepayment penalties on its auto loans. That could be ideal if you plan to pay off your car loan early.
• “Rate Beat” program — LightStream says it will beat a competitor’s interest rate offer by 0.1 percentage point if certain conditions are met.
• Shop like a cash buyer — In some cases, LightStream will deposit your loan funds into your account as quickly as the day you apply, allowing you to shop like a cash buyer at the dealership or among private sellers. But keep in mind that depending on your bank, there may be a wait before you can access your cash.

Read our LightStream auto loan review to learn more.

Capital One Auto Finance: Good for ability to apply for prequalification

Why Capital One Auto Finance is a good alternative: Similar to Citizens One, Capital One Auto Finance may consider you for an auto loan if you have less-than-perfect credit. But unlike Citizens One, you have the ability to apply for prequalification with Capital One. Getting prequalified can make it easier to compare potential loans across lenders. If you’re prequalified, you’ll be able to see the estimated loan rate and terms you might qualify for without your credit scores taking a hit. Just keep in mind that prequalification isn’t a guarantee of loan approval, and you may end up getting approved for different loan terms, based on the information you provide during the application process.

Here’s some more info about Capital One Auto Finance.

• Considers borrowers with less-than-stellar credit — In 2019, 52% of people who got auto loans had a FICO score of 660 or lower, according to Capital One’s 2019 annual report.
• Must buy from a partner dealership — You’ll be limited to shopping for a car at one of Capital One’s participating dealers. The good news is that the lender’s network consists of more than 12,000 dealerships, so you may have multiple options.
• Limited loan options — Beyond financing for new and used cars bought at a participating dealer, Capital One Auto Finance only offers refinance loans. If you plan to buy from a private party or want to buy out your lease, you’ll need to consider a different lender.
• Shop for cars with Auto Navigator — If you’re prequalified, you can use the Auto Navigator tool to shop for a car and see your estimated loan rate and monthly payment based on the terms you prequalified for. This information can help you find a car that fits your budget before you head to the dealership. Note that prequalifcation isn’t a guarantee of approval, and you may be offered different terms after completing a full application.

For more details, check out our Capital One Auto Finance review.

Chase: Good for flexible loan options

Why Chase is a good alternative: Chase offers a range of loan options. Loan amounts range from as low as $4,000 to as high as $600,000 — significantly more than most other lenders offer. The bank also offers loan terms ranging from 36 months to 84 months. A longer loan term (like up to 84 months) can reduce your monthly loan payment — but be aware that you could end up paying more in interest over the length of the loan.

Here are some more things to know about Chase auto loans.

• No down payment required — Chase may not require you to put money down on a loan. But remember that making a down payment on an auto loan can reduce your car payment and the amount of interest you pay by lowering your total loan amount.
• Limited loan options — Chase only offers auto loans for new and used vehicles from a partner dealership as well as refinance loans. The lender won’t finance a car bought from a private party, motorcycles, RVs, vehicles used as taxis, limousines, or to provide ride-share services.

To learn more, read our Chase auto loan review.

U.S. Bank: Good for competitive new- and used-car rates

Why U.S. Bank is a good alternative: Like Citizens One, U.S. Bank offers loans for new- and used-vehicle purchases. But what makes U.S. Bank unusual is that it offers the same interest rates for both new and used cars up to six years old. Rates are typically higher for used-car loans.

If you’re thinking about a U.S. Bank car loan, here are more details to consider.

• Loan fees — The bank notes that it charges loan fees, including a prepayment penalty of 1% of the original loan amount — up to $100 — if you pay off your loan within one year.
• Limited availability — You can apply for car-loan preapproval online, but you must head to a bank branch to finish your application. Branches are located in only 26 states.
• Ability to borrow more than the car’s value — If you qualify, the bank may allow you to borrow up to 120% of your vehicle’s value, with no down payment required. Borrowing more than the value of the car you plan to buy can help cover any extra costs associated with your purchase, such as registration and vehicle title fees or an extended warranty. But doing this puts you at immediate risk of having negative equity — owing more on your loan than your car is worth. Negative equity can make selling or trading in the vehicle down the road more complicated.

Read our U.S. Bank auto loans review to learn more.

As you consider these alternatives to Citizens One auto loans, remember to shop around and compare loan rates and terms from several lenders. Whether you’re buying a new car or want to refinance your existing auto loan, taking the time to do this research could pay off by helping you identify the best deal for your budget and needs.

Updated October 22, 2021

This date may not reflect recent changes in individual terms.

Editorial Note: Intuit Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. Information about financial products not offered on Credit Karma is collected independently. Our content is accurate to the best of our knowledge when posted.

Written by: Rebecca Giantonio Moran

Editors’ Take

Credit Acceptance Corp. may be one of only a few lender options if you have bad credit or no credit. But you’ll sacrifice flexibility and transparency. This lender chooses which dealers you can work with, and those dealers determine your loan terms — making it difficult to compare loans in advance.

Credit Acceptance Corp. auto loans at a glance

• Types of loans offered: New- and used-car loans only, through select dealerships
• Starting APR: Not disclosed
• Loan amounts: Determined by dealer
• Loan terms: Determined by dealer
• Minimum credit scores required: Not disclosed. But 94.3% of the lender’s existing loans in the first quarter of 2021 were to people with FICO scores below 650 or no FICO scores, according to the company’s March 31, 2021, SEC filing.
• Vehicle restrictions: “Nearly any” vehicle at a participating dealership is eligible for financing.
• Availability: Available in all 50 states
• Ability to apply for prequalification or preapproval? No
• How to apply: Get connected with three local dealers by beginning the credit approval process online.
• Other requirements: Must be 18 years old. Must have a Social Security number to complete the loan application process at the dealership. Must have proof of income. Down payment is set by dealer.

Pros

• Considers applicants with bad credit or no credit and a range of income
• Reports payments to all three credit bureaus
• Flexible payment plans with autopay enrollment

Cons

• Loan terms are determined by the dealer
• The lender’s network includes buy-here, pay-here dealerships
• Limited loan options

What you need to know about Credit Acceptance Corp. auto loans

Based in Southfield, Michigan, Credit Acceptance Corp. offers indirect, subprime auto loans through its network of franchise, independent and buy-here, pay-here dealerships across the country.

Considers applicants with bad or no credit and different types of income

Credit Acceptance Corp. specializes in working with people with lower credit scores or no credit history at all.

The company claims on its website that it “enables dealers enrolled with Credit Acceptance to approve everyone,” including people who have experienced financial setbacks such as multiple car repossessions and bankruptcies. It’s even possible for people with fixed income, unemployment income or temporary income — or people who are self-employed — to get approved.

If you’re struggling to get approved for an auto loan with other lenders, you may have a better chance of approval with Credit Acceptance Corp.

Offers flexible payment plans

If you’re approved for a loan and enroll in the company’s autopay feature, you’ll have a choice of a weekly, bi-weekly, monthly or semi-monthly payment plan to fit your financial situation. These options also make it easier to line up your payments with your paychecks.

You’ll be limited to buying from a partner dealership

If you want to work with Credit Acceptance Corp., you’ll have to buy a car through one of its partner dealerships. These dealerships are located in all 50 states, but there’s no guarantee they’ll be close to where you live.

It’s also worth noting that some of these dealerships are buy-here, pay-here dealers. Interest rates with these dealers can be high — the average was 18% in 2019, according to the National Independent Automobile Dealers Association’s 2020 Used Car Industry Report. That interest can add up — for example, if you bought a $12,000 used car with an interest rate of 20% and 60-month loan term, you’d end up paying an additional estimated $6,283 in interest.

Comparing loan terms isn’t easy

Shopping around for an auto loan and comparing options can help you find the best loan for your needs. But with Credit Acceptance Corp, getting an idea of the rate and terms you may qualify for can be a time-consuming process.

Loan requirements and terms are set by each partner dealership, so you won’t be able to see rate quotes or possible loan terms upfront. You’ll first need to fill out the initial credit approval form on the Credit Acceptance Corp. website. From there, the lender will match you with up to three car dealers in your area. You’ll then need to visit those dealers and choose a car to get a sense of the loan terms they may offer you.

Is there a grace period with Credit Acceptance?

Credit Acceptance Corp. doesn’t offer a grace period. The lender considers any payments you make after your due date to be past due.

Does Credit Acceptance help your credit?

Credit Acceptance Corp. reports your payments to all three major credit bureaus. Making consistent auto loan payments, in full and on-time, can help you build or rebuild your credit. Learn more about the factors that can affect your credit scores.

Can I refinance my car loan with Credit Acceptance?

Credit Acceptance Corp. doesn’t offer refinance loans. It only offers new- and used-car loans through its network of dealerships across the country. But it may be possible to refinance your existing Credit Acceptance Corp. auto loan with another lender. That could be a good idea if your credit has improved or interest rates have dropped since you got your auto loan and you think you may be able to qualify for a lower rate.

Learn more about when refinancing a car may make sense.

Alternatives to a Credit Acceptance Corp. auto loan

Credit Acceptance Corp. isn’t the only lender that considers people with a range of credit profiles. If you’re not sure whether Credit Acceptance Corp. is right for you or want to shop around, here are a couple of other lenders to consider.

• Auto Credit Express auto loan: This lender may be a good option for people with bad credit who want to refinance their car loan.
• MyAutoLoan auto loan: MyAutoLoan could be a strong choice if you want the ability to apply for prequalification and quickly get multiple loan offers that you can compare, if you’re prequalified. Just keep in mind that prequalification isn’t a guarantee of loan approval.

When you’re shopping for a car loan, you generally have two options: a loan through a dealership’s financing department or a loan from a financial institution, such as a bank. In many cases, a car loan from a bank may be a better option.

Let’s take a look at some of the reasons a car loan from a bank may be preferable, as well as a couple of situations where getting a loan from a dealership might make more sense.

• Reason #1: A bank won’t pressure you to buy a car
• Reason #2: A bank can preapprove you for a car loan
• Reason #3: A dealer may mark up interest rates
• When is a car loan from a dealership a better option?
• Which bank is best for car loans?

Reason #1: A bank won’t pressure you to buy a car

It’s all too easy to head to the dealership, fall in love with a car and make an emotional decision to buy it right then and there without comparing your financing options. Dealers may even pressure you to finance through them so they can close the sale and receive compensation for arranging the financing.

Dealers may also offer a certain car price or loan terms if you finance through the dealership, or use tactics like lengthening your loan term to lower your monthly payment (though you’ll likely end up paying more interest over the life of the loan).

You can help take some of the pressure and emotion out of your decision by shopping around for a loan and applying for preapproval with various lenders, including banks, before you set foot in a dealership.

Reason #2: A bank can preapprove you for a car loan

Some banks offer you the ability to apply for preapproval for an auto loan. If you’re preapproved, the bank will let you know the loan amount, rate and terms you’re conditionally approved for.

Keep in mind that preapproval isn’t a guarantee of loan approval or that you’ll receive the same estimated rate and terms — you’ll still need to finalize and submit your loan application. But it can give you a good idea of the terms you may be approved for by various lenders so that you can find the best deal.

It’s worth noting that some automakers’ finance companies also offer the ability to apply for preapproval — but you’ll be limited to buying one of the automaker’s vehicles. For example, if you’re preapproved for a loan from Lexus Financial Services, you’ll only be able to use that loan to buy a Lexus at a participating Lexus dealership.

How to apply for preapproval

Depending on the bank, you may be able to apply for preapproval online, over the phone or at a branch. You’ll likely need to provide some personal information, such as your Social Security number and birthdate, as well as employment and income details. The bank may review your credit with a hard inquiry, which could ding your credit scores by a few points.

Wait to begin the preapproval process until you’re serious about starting your car loan shopping. Multiple hard credit inquiries within a time frame of 14 to 45 days will only count as one, so it makes sense to do them around the same time.

Once you’re preapproved and identify the loan that best fits your needs, you can head to the dealership with your preapproval documents.

Benefits of getting preapproved for a car loan

Being preapproved can give you a leg up at the dealership in a few ways. First, you can shop like a cash buyer at the dealership. Let the salesperson know you’re looking into financing elsewhere — this way, you can avoid any discussion about it and instead focus on negotiating the price of the car you want to buy.

The dealer may end up trying to beat your preapproval offer to win your business. If they do, going with dealer-arranged financing may be your best option. But you’ll never know if you don’t do the homework first by gathering estimated loan offers from various lenders and comparing them.

In addition, knowing how much you’re preapproved for can help you avoid spending more than you planned. The preapproval amount is the maximum you can spend (unless you have some extra cash stashed away). You can use this maximum to walk away if the dealer won’t negotiate with you, or to say no to upsells.

Reason #3: A dealer may mark up interest rates

With dealer-arranged financing, the dealer essentially shops around for you, gathering different offers from financial institutions such as banks, credit unions or the automaker’s finance company. But the dealer may raise the interest rate of the loan they present to you.

This markup compensates the dealer for handling the financing and could result in you paying hundreds or thousands of dollars more over the life of the loan. Lenders may allow dealers to add up to 2.5% to the interest rate, according to the Center for Responsible Lending’s November 2015 report titled “Road to Nowhere: Car Dealer Interest Rate Markups Lead to Higher Interest Rates, Not Discounts.”

Let’s say a lender quoted a 4% interest rate on a $30,000 loan with a 60-month term. Over the length of the loan, you’d pay an estimated $3,150 in interest. But if the dealer marked up the interest rate to 6.5% on that same loan, you’d end up paying an estimated $5,219 in interest — a more than $2,000 difference.

If the dealer quotes you a rate that’s significantly higher than other auto loan rate estimates you’ve received, consider trying to negotiate the rate with the dealer.

When is a car loan from a dealership a better option?

In some cases, a car loan from a dealership may make the most sense for you — but it’s still worth shopping around before you decide.

If you qualify for 0% APR financing or other incentives

If you qualify for 0% APR, or annual percentage rate, financing or other incentives — such as car rebates or bonus cash — that some dealers offer, you might find that getting an auto loan through the dealership is the least expensive financing option. But be aware that you typically need excellent credit to qualify for these incentives, and you’ll likely need to get your loan through the automaker’s finance company.

If you have less-than-perfect credit

While some banks consider applicants with less-than-perfect credit, you may find that getting approved for financing through a dealership is easier. Dealerships usually have relationships with a variety of finance companies and may be able to secure financing for you. Some dealerships even have special financing departments dedicated to helping people with lower credit scores get financing.

A word of caution: Some dealerships offer “in-house financing” and target people with poor credit. These dealers act as their own banks, which means your loan will come directly from the dealership versus from a bank or credit union that has a relationship with the dealership.

Also known as buy-here, pay-here financing, the loans these dealerships offer can come with high interest rates. Consider a buy-here, pay-here dealership as a last resort, after you’ve exhausted all other financing options.

Which bank is best for car loans?

The best bank for you will depend on a range of factors, including your financial situation and the type of vehicle you want to buy. But here are a few banks that stand out.

Bank of America

Bank of America offers a range of auto loan options, including financing for lease buyouts and private-party purchases. For those who qualify, the bank offers a low starting interest rate. And if you’re a Preferred Rewards customer, you may be able to get a discount of 0.25% to 0.5% on your rate. Keep in mind that qualifying for these discounts requires a three-month average combined balance of at least $20,000 in your Bank of America bank or Merrill investment accounts to qualify for the lowest (0.25%) discount and at least $100,000 to qualify for the highest (0.5%) discount. It’s also worth noting that if you plan to buy from a dealership, you’ll be limited to franchise dealerships and a few independent dealers: CarMax, Carvana and Enterprise Car Sales.

Read our Bank of America auto loan review to learn more.

Capital One Auto Finance

Capital One Auto Finance may consider you for an auto loan if your credit isn’t perfect. And the bank makes it easy to see estimated loan terms without affecting your credit scores by offering the ability to apply for auto-loan prequalification. But like Bank of America, Capital One has restrictions on where you can buy a car. You’ll be limited to shopping at one of Capital One’s partner dealerships.

Check out our Capital One Auto Finance review for more details.

LightStream

LightStream — a division of Truist Bank — also offers a range of vehicle loan options, including private party, classic car and lease buyout loans, as well as motorcycle and RV purchase loans. With its Rate Beat program, LightStream will beat a competitor’s interest rate offer by 0.1 percentage point if certain conditions are met. This lender also provides funding quickly — LightStream will deposit your loan funds into your account as soon as the day you apply, in some cases.

Read our LightStream auto loan review for more info.

U.S. Bank

U.S. Bank offers the same interest rates for both new and used cars up to six years old. This is rare — rates for used-car loans are typically higher than for new-car loans. The bank allows you to apply for preapproval online, but you’ll need to head to a bank branch to complete your application. This means that if you don’t live in one of the 26 states where U.S. Bank has branches, you won’t be able to apply.

Read our review of U.S. Bank auto loans to learn more.

Next steps

With banks, credit unions, online lenders and dealerships all offering loans, you could have a lot of auto financing options.

Take the time to shop around, apply for preapproval and compare estimated loan rates and terms. Then, once you find a car at the dealership, see if the dealer can beat your best loan offer. Read our article on how to negotiate your car price for more tips to help save money on your auto loan.

Calculate your RV loan

Estimate your monthly payments and how much you might need to borrow by using our RV loan calculator.

You may be able to get a car loan with bad credit, but you’ll want to carefully weigh the costs.

If you need a car loan but have less-than-perfect credit, your financing terms may be expensive. Lenders use credit scores to estimate the likelihood you’ll pay back your loan — the lower your scores, the more risk they believe they’re taking on. In exchange for that risk, lenders will usually charge a higher interest rate.

For example, someone with subprime credit (which Experian defines as scores of 501 to 600) received an average rate of 11.53% for a new vehicle and 18.55% for a used one in the first quarter of 2023, according to an Experian report. By comparison, the average interest rate on a 60-month new-car loan was 7.48% during that same period, according to the Federal Reserve.

We’ll look at some steps you can take to shop for an auto loan that may help lower the cost of financing a vehicle, as well as review our picks for auto lenders that offer car loans for bad credit.

• How can I get financed for a car loan with bad credit?
• What’s a good credit score for a car loan?
• Best car loans for bad credit

How can I get financed for a car loan with bad credit?

These steps could help you improve your chances of getting approved for a car loan that fits your budget.

Check your credit scores

Before you begin shopping for a car loan, check your credit. Review your credit reports for any incorrect information and dispute those errors. Inaccuracies could lower your credit scores and hurt your ability to qualify for a loan.

Checking your credit can also help set your expectations before you start looking for a loan. You can check your Equifax and TransUnion credit reports for free on Credit Karma or request one free credit report from each credit bureau per year at annualcreditreport.com.

If you don’t need a new car right away, taking some time to build your credit could pay off — you may be able to qualify for a lower interest rate that could save you thousands on your auto loan.

But if you can’t wait, you may want to consider asking a family member or close friend to be a co-signer. A co-signer with good credit could give you a better chance of getting approved for a loan or may help you get a better loan rate and terms.

Save for a down payment

Saving for a down payment on your car can come with several benefits. First, a down payment may help you qualify for an auto loan more easily, especially if you have low credit scores. Without a down payment, the lender takes on more risk since it may lose more money if you don’t repay the loan and it needs to repossess the car. In fact, some lenders may require you to put some money down.

Plus, you’ll pay less interest with a down payment. The more money you put down, the less you’ll need to borrow for the car. That means you’ll pay interest on a smaller balance, lowering your total interest paid.

You may also get a lower interest rate if you make a down payment. Lenders consider your loan-to-value ratio — your loan amount versus the value of the vehicle — when setting your interest rate.

Determine how much you can afford

Think beyond your monthly loan payment as you figure out how much you can afford to borrow. Consider the costs of car ownership — such as fuel, regular maintenance, auto insurance, and any parking expenses or property taxes — and factor them into your budget.

It may be tempting to stretch your loan term to six or seven years in exchange for a lower monthly payment. But keep in mind that a longer auto loan term (like up to 84 months) means you could end up paying more in interest over the length of the loan — and you increase your risk of becoming upside down on your loan, which can create some challenges when it’s time to sell or trade in your car because you’ll owe more than it’s worth.

Our auto loan calculator can help you estimate how much you’d pay in interest on a car loan.

Shop with different lenders

Shopping around and comparing rates and loan terms across lenders may help you find the best loan for your needs and your budget. If you have bad credit, here are some lenders you might consider.

• Your current bank or credit union — If you already have a relationship with a bank or credit union, that can be a good place to start.
• Online lenders — Some online lenders and lending platforms specialize in car loans for people with bad credit. They may also allow you to apply for prequalification directly on their websites. If you’re prequalified, you’ll be able to see the estimated loan rate and terms you may qualify for. Just keep in mind that prequalification isn’t a guarantee you’ll be approved for the loan or the estimated loan terms.
• Car dealerships — Dealerships typically have relationships with a number of banks and finance companies, which means they may be able to find a lender in their network that will approve you for a loan. Some dealerships also have special financing departments that are dedicated to helping people with poor credit.
• Buy-here, pay-here dealerships — If you can’t get approved for an auto loan anywhere else and you need a car, a buy-here, pay-here dealership could be an option — but consider it a last resort. These “no credit check” dealerships offer their own loans to people with bad credit — and their interest rates tend to be much higher than those offered by banks and other lenders.

To minimize the impact that shopping for an auto loan can have on your credit, it’s a good idea to shop for rates within the same time period. FICO scoring models count multiple credit inquiries of the same type within a 45-day period as a single inquiry. VantageScore counts multiple inquiries within a 14-day period as a single inquiry.

What’s a good credit score for a car loan?

There is no universal minimum credit score needed for a car loan, but the terms and approval odds of a loan are impacted by your credit scores. Lower credit often means fewer available offers and generally higher interest rates — which why it’s important to shop around for the best terms on potential auto loans. When possible, working to improve your credit scores before applying for a loan may help improve the terms of your offer.

Can I get a car loan with a 500 credit score?

It’s possible to get a car loan with a credit score of 500, but it’ll cost you. People with credit scores of 500 or lower received an average rate of 14.08% for new-car loans and 21.32% for used-car loans in the first quarter of 2023, according to the Experian State of the Automotive Finance Market report.

That’s a big difference from the loan rates for people with credit scores of 661 to 780 (considered prime) — they received average rates of 6.4% for new-car loans and 8.75% for used-car loans.

Getting a car loan with a credit score of 500 could be tough, too. The Experian report shows that only 5.08% of new-car loans and 3.06% of used-car loans issued in the first quarter of 2023 went to people with credit scores of 500 or lower.

Best car loans for bad credit

Here are some of our picks for lenders that offer car loans for bad credit.

Good for interest rate discounts: New Roads

New Roads offers interest rate discounts on certain pre-owned and new car models that could reduce your overall interest payments. And if you’re struggling to come up with a down payment, it’s good to know that New Roads doesn’t require one.

Read our New Roads auto loans review for more information.

Good for one-stop shopping: Carvana

With Carvana, you can save time by shopping for financing and a car in one place. Carvana considers applicants with bad credit, as long as they’re 18 years old, have a minimum income of $4,000 per year and have no active bankruptcies.

Check out our Carvana financing review for more details.

Good for people who have filed bankruptcy: RoadLoans

In general, bankruptcies in your credit history can affect your ability to get approved for an auto loan. But RoadLoans considers applicants who have filed for bankruptcy in the past — as long as the bankruptcy has been discharged.

Learn more — read our RoadLoans review.

FAQs for getting a car loan with bad credit

Looking to build your credit? Consider a credit builder loan.

Taking out a credit builder loan can help you build your credit by giving you the opportunity to show you can make regular on-time payments, which is an important part of your credit scores. 

When you get a credit builder loan, the lender typically puts the money you’ve borrowed into a reserve account it controls. You then make regular payments toward the loan, building a positive payment history that’s reported to the credit bureaus. When the loan is paid off (or you reach a certain threshold), the lender gives you access to the funds. 

Loan fees, interest and repayment terms vary among lenders, so you’ll want to compare your options before applying.

You might also want to consider Credit Karma’s Credit Builder plan, which can help you build low credit while you save.

What’s next?

Car loans for bad credit are out there, but they can be expensive. Taking steps to improve your credit before car shopping can lessen some of the financial burden.

If you’re unable to delay your car purchase, consider buying a lower-priced, but reliable, used vehicle that meets your needs but requires you to borrow less. As you pay down your loan and work on improving your credit, you may be able to refinance your auto loan for a better rate down the road.

If you’re struggling to make your auto loan payments or want to take advantage of lower interest rates, you might want to consider refinancing a car loan, even if you have bad credit.

Although there are no guarantees, you may be able to refinance your car loan with bad credit. Whether you want to refinance to lower your interest rate, reduce your loan payments or get a loan with better terms, some lenders focus on auto loan refinancing for people who have bad credit.

Here are some steps to consider if you want to refinance.

• Can you refinance a car loan with bad credit?
• Check your credit reports and credit scores
• Reach out to your lender
• Shop around to find the best option
• Best lenders to refinance your car loan when you have bad credit

Can you refinance your car loan when you have bad credit?

Refinancing your car loan when you have bad credit may be possible, but it could be difficult to get a lower rate if your credit hasn’t improved since you got your original auto loan. In general, the lower your credit scores, the higher your interest rate.

If auto loan rates have decreased since you got your current loan, you may be able to get a better interest rate. Checking historical data on average interest rates on new auto loans is one way to tell if rates have generally improved. If the interest rate for the month you got your original loan is higher than today’s rates, it may be a good time to look into refinancing for a lower rate.

But keep in mind that new-car rates are different from refinance loan rates — historical data is just a way to get a general sense of how auto loan interest rates are trending.

If your refinance goal is to get a lower monthly payment (versus a lower rate), you may need to extend your loan term. Be aware that a longer term could increase the total amount of interest you pay over the length of your loan.

Here are some steps that can help you find an auto refinance loan that fits your needs.

1. Check your credit reports and credit scores

Before you apply for a refinance loan, check your credit. Review your credit reports for any incorrect information and dispute those errors. Inaccuracies could hurt your credit scores, which could affect your ability to qualify for a new loan.

Checking your credit and knowing your credit scores can also help set your expectations before you start shopping for a loan. For example, if a previous bankruptcy is still on your credit reports, you’ll want to shop lenders that consider applicants with previous bankruptcies in their credit history.

You can check your Equifax® and TransUnion® credit reports for free on Credit Karma or request one free report per year from each credit reporting agency on annualcreditreport.com.

What credit scores do I need to refinance my auto loan?

There’s no universal minimum credit score for refinancing your auto loan. Different lenders have different requirements, and some lenders specialize in working with people with bad credit, including those who have bankruptcies or repossessions in their credit histories.

But if your goal with a refinance is to get a lower rate, it helps to have better credit scores than when you applied for your original auto loan.

2. Reach out to your lender

Before looking for a new lender, you may want to reach out to your current one. If your loan is in good standing, your credit scores have improved or auto rates have gone down, your lender may be willing to refinance your loan. Some lenders won’t refinance their own auto loans, so be sure to check whether your current lender may be an option.

If your lender is open to a refinance and wants to do a hard pull on your credit reports, make sure you’re ready to shop around quickly to minimize the impact on your credit. FICO® scoring models count multiple credit inquiries of the same type within a 45-day period as a single inquiry. VantageScore counts multiple inquiries within a 14-day period as a single inquiry.

3. Shop around to find the best option

Even if your lender is willing to refinance your loan, shopping around and comparing offers can help you make sure you get the best refinance loan for your needs and budget.

Compare the annual percentage rate, loan term and any fees — such as origination fees — across offers.

Best lenders to refinance your car loan when you have bad credit

If you aren’t sure where to start, check out our picks for the best auto refinance lenders that consider applicants with bad credit.

Auto Credit Express

Auto Credit Express is a lending platform that connects people with a network of lenders that offer auto financing to people with bad credit.

Read our review on Auto Credit Express.

Tresl

While not a direct lender, Tresl (formerly Innovative Funding Services) offers the ability to quickly see if you qualify for an auto loan from any lenders in its network.

Learn more — read our review on Tresl auto loans.

Next steps

If you want to refinance your car loan and have bad credit, taking the time to do some homework could pay off. Checking your credit and disputing any errors, talking to your current lender and shopping around could help you get a refinance loan that meets your needs.

If you’re struggling to get qualified for auto refinancing, you may want to consider asking a friend or family member to be your co-signer. A co-signer with good credit may give you a better chance of getting approved or help you get a better loan rate and terms. If a co-signer isn’t an option and you’re struggling to make payments, check out our article on what you can do if you’re facing auto loan default.

Calculate your auto loan refinance

Use the auto refinance calculator to estimate your monthly payments and how much you may be able to save by refinancing your current auto loan.

Behind-the-wheel behavior — such as getting a traffic ticket or being involved in a crash — is only one of the factors that affect car insurance rates.

A host of other factors can also dictate how much you pay for auto insurance. For example, your credit history — and even where you live — could prevent you from getting a lower car insurance rate.

Let’s take a look at 10 factors that can help determine whether your car insurance premium is affordable or astronomical, and ways you may be able to lower your rate.

1. Your age
2. Your driving history: Experience, claims and violations
3. Your mileage
4. Your vehicle: Make, model and safety features
5. Your location
6. Your credit
7. Your gender
8. Your marital status
9. Your auto insurance coverage: Types, coverage limits and lapses
10. Your auto insurance company: Rates and discounts

1. Your age

Younger drivers with little to no on-the-road experience normally pay a steeper price to get behind the wheel than their parents do. Why? Teens are at a higher risk of crashing a car than drivers in any other age group.

For 16- to 19-year-olds, the fatal-crash rate per mile driven is almost three times the rate for drivers age 20 or older, according to the Insurance Institute for Highway Safety’s analysis of 2018 data from the U.S. Department of Transportation.

Generally, a car insurer will charge a higher rate if any driver below age 25 is covered under a policy.

Similarly, rates go up for drivers after age 65 because of increased auto insurance claim rates and risk. The Insurance Institute for Highway Safety’s analysis found that older drivers, especially those age 75 and older, have higher crash death rates than drivers age 30 to 74.

2. Your driving history: Experience, claims and violations

In short, the cleaner your driving record, the better your insurance rate will be.

If you’ve had accidents or serious violations — such as a DUI or DWI conviction, too many tickets in a short time frame or driving without insurance — insurers will consider you a high-risk driver and charge you a higher premium. Likewise, if you’ve filed several insurance claims or had claims filed against you, your rate will typically be higher.

Newer drivers also typically pay higher rates than those with a longer history of safe driving.

3. Your mileage

Do you have a lengthy commute to and from work each day? If so, you might pay more for car insurance than someone who merely depends on a vehicle to run quick errands. That’s because more miles logged translates into more roadway risks, such as a car crash.

4. Your vehicle: Make, model and safety features

Your car’s make, model and safety features can all affect your insurance rate because of several factors.

Cost of the car and repairs

The rate for insuring a luxury car like a Mercedes-Benz will normally be higher than the rate for a more affordable car like a Honda. Why? A higher-priced car typically costs more to repair or replace than a cheaper model does, says John Espenschied, owner of Insurance Brokers Group.

Potential for injury or damage

Another rate-setting variable is a car make and model’s overall safety record, says Loretta Worters, a spokeswoman for the Insurance Information Institute, an industry-backed nonprofit that helps consumers understand insurance issues.

“Insurers not only look at how safe a particular vehicle is to drive and how well it protects occupants, but also how much potential damage it can inflict on another car,” she says.

If the model you drive is more likely to cause damage in an accident, your liability insurance premium may be higher. You can check a car’s safety rating on the Insurance Institute for Highway Safety’s website.

The good news is that if you have a car with safety features, such as antilock brakes, an anti-theft system or blind-spot indicators, you may be able to qualify for an auto insurance discount.

Likelihood of theft

Auto insurance companies may charge you more if your vehicle’s make is among those that are stolen the most. The National Insurance Crime Bureau reports on the top 10 most stolen vehicle makes each year. In 2019, full-size Ford pickups, the Honda Civic and full-size Chevrolet pickups were the top three types of vehicles targeted by thieves.

5. Your location

In setting car insurance rates, insurance companies drill down to the ZIP code where your car will be parked the majority of the time.

Because of generally higher rates of accidents, theft and vandalism, car owners who live in urban areas might pay higher auto insurance premiums than their small-town or rural counterparts do, Worters says.

Here are some other location factors that may affect your auto insurance rates.

• How much auto insurance fraud occurs in your area
• Which kinds of severe weather, such as hailstorms and ice storms, hit your region (and how often)
• How much car repairs cost in your area

6. Your credit

How you handle credit affects your ability to get a credit card or a mortgage, but it can also influence how much you spend on car insurance.

Depending on state law, car insurers can use what’s known as a credit-based insurance score when calculating the price of your coverage.

Historical data suggests that your credit history can help predict the likelihood that you’ll file an insurance claim — Federal Trade Commission studies have revealed that those with less-than-perfect credit are more likely to file auto insurance claims than those with good credit.

A not-so-great credit history can trigger a rise in your insurance rates because companies view you as a bigger financial risk. Drivers with poor credit pay $1,546 more on average for car insurance than those with excellent credit, according to The Zebra’s 2020 The State of Auto Insurance report.

State laws in California, Hawaii, Michigan and Massachusetts prohibit this credit-based insurance scoring from being factored into car insurance rates.

Keep in mind that a credit-based insurance score isn’t the same as the credit scores that come into play when you apply for a car loan or credit card. Regular credit scores examine an array of factors to determine how likely you are to repay a loan or a line of credit.

Meanwhile, a credit-based insurance score looks at some, but not all, factors in your credit history to determine how likely you are to file an insurance claim. Among other things, insurers take into consideration your credit utilization, credit history, delinquencies and credit mix to come up with your credit-based insurance score.

7. Your gender

While men under 20 generally pay more for auto insurance than women of the same age range, the Consumer Federation of America found in 2017 that women between the ages of 40 and 60 often pay higher rates — anywhere from 1% to 16% more than men, depending on the insurance company.

In some states, including California, Massachusetts, Michigan, Montana, North Carolina and Pennsylvania, it’s against the law for rates to be based on gender.

8. Your marital status

Whether you’re single or married can also affect your insurance premium. Insurance companies have found that married drivers are less likely to file auto insurance claims than non-married drivers. As a result, married drivers may pay less for insurance coverage than single drivers.

But similar to insurance score and gender, some states — including Hawaii, Montana and Massachusetts — have outlawed marital status as a factor in determining someone’s insurance rate.

9. Your auto insurance coverage: Types, coverage limits and lapses

Several factors related to your auto insurance coverage can affect your rates.

Types of car insurance you buy

The more coverage you purchase, the higher your insurance costs will be. The types of coverage you need vary based on your state’s requirements and whether you own your vehicle outright or finance or lease it.

Liability insurance is mandatory in every state except New Hampshire. But New Hampshire does mandate that drivers prove they can provide a sufficient amount of money in case of an at-fault crash. The car insurance mandate has a slight twist in Virginia: Drivers are required to buy coverage or pay an uninsured motor vehicle fee to the state’s department of motor vehicles.

Some states may also require personal injury protection, or PIP, uninsured/underinsured motorist coverage or medical payments coverage.

Additionally, if you have a car loan or lease your vehicle, the lender may require you to buy comprehensive and collision coverage.

Coverage limits and deductibles

A coverage limit is the maximum amount your insurance company will reimburse you on a covered claim. The higher your coverage limit, the higher your premium will be.

Your deductible is the amount you’ll pay out of pocket on a covered claim before your insurance kicks in. A higher deductible will lower your premium, but you’ll need to come up with more cash if your car is damaged or stolen. Alternatively, a lower deductible means you’ll pay less money upfront, but your premium will be higher.

Coverage lapses

If you’ve let your auto insurance lapse in the past, you could be considered a high-risk driver, and your rate could be higher than someone who’s maintained consistent coverage.

10. Your auto insurance company: Rates and discounts

The auto insurance company you choose is a key factor in how much you pay for insurance. Rates vary by insurer, and some insurers offer a broader range of discounts than others.

Depending on the company, you may be able to find loyalty, multi-policy, multi-car paperless, good driver, good student, safety feature, military, homeowner and pay-in-full discounts, among others.

That’s why it’s so important to shop around and compare insurance quotes from multiple insurers to help make sure you’re getting the best policy for your needs and budget.

Next steps

Shopping around for car insurance is crucial — whether you’re shopping for auto insurance for the first time or looking for a new policy because you bought a new car, moved, changed your driving habits or experienced another change in circumstances. Be sure to ask insurance companies about any rate discounts they might offer. And if you’re a careful driver or don’t drive much, ask whether the insurer offers any usage-based insurance programs. Depending on the policy, this type of insurance bases your premium largely on either how safely you drive or your mileage, which could save you money.

Even if you already have an auto insurance policy you’re happy with, shopping around each year can help you assess whether you still have the best rate for yourself or can find a better rate elsewhere.