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How to Finance a Car with Less-than-Perfect Credit

Financing a vehicle with less than perfect credit is possible. Your financing terms will be higher than people who have prime or super prime credit scores (see chart below) and you may have to do a little more work to find the best vehicle for your budget, but you will find something that works.


We have outlined a few tips to help you get started:

Boost Your Credit Score

Raising a credit score is a long-term process, but there are a few things you can do to get a quick boost. Run your credit score to see if there are any loans or credit card purchases affecting your standing. If you’re not in a rush, give yourself a few months to clear it and have it reflected on the credit report.

Credit tiers:

  • Super Prime: 781-850
  • Prime: 671-780
  • Nonprime: 601-680
  • Subprime: 501-600
  • Deep subprime: 300-500

Credit tiers greatly affect the interest rate of the loan. The interest rate on a deep subprime loan can be twice as much as for nonprime. The chances of even getting financing decrease with the tiers, so make sure to boost your score to the next tier if possible.

Down Payment Matters

Making a larger down payment is a great way to mitigate the drawbacks of not having an ideal score. Interest rates are a deceptive factor, as most people assume the percentage is how much they’ll have to pay over the loan value. On a $20,000 loan with a 10% interest rate over 60 months, you’re looking at $5,000 in interest fees - a much larger sum than first expected.

Save up as much as you can, and consider buying a car with a very achievable monthly rate. Negotiate with the loan provider to have your interest rate lowered if you provide a large down payment.

Make Smart Choices

Look at your financing terms and determine which will work for your situation. Does a 72 month or 60 month loan work? In the long-term (72 months) you’ll not only be paying more, but also be stuck with a car that is depreciating in value. By going with a short payment period, you’ll lower the total cost of financing, and get your credit score in better standing more quickly.

We hope these few tips will help you get on road with your used vehicle. Remember, taking some time to rebuild your credit will help with approval and will reduce your annual percentage rate. But if you need a vehicle, quickly a larger down payment and shopping interest rates is a great way to start.

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