Let’s face it—shopping for a car with bad credit can feel intimidating. But here’s the good news: even if you have a 500 credit score, getting a car loan in 2025 is still possible. Sure, you won’t get the rock-bottom interest rates, but many lenders are more flexible than ever, especially if you come prepared. So don’t let your credit score stall your car buying journey—let’s dive into what you need to know.
What Does a 500 Credit Score Mean for a Car Loan?
A 500 credit score is considered poor, but it’s not a dealbreaker. Many lenders—especially those specializing in subprime loans—offer car loans to people with low credit scores. However, expect to pay a higher interest rate, usually between 10% and 20%, depending on other factors like income, employment history, and the size of your down payment.
Dealerships with in-house financing, credit unions, and online lenders may all have programs available for buyers with a 500 score. The key is to shop around, compare rates, and avoid getting locked into a bad deal.
Car Insurance: What to Expect with Bad Credit
Before you even drive off the lot, you’ll need car insurance, and unfortunately, your credit score can affect those rates too. Insurers use credit-based insurance scores to predict how likely you are to file a claim. That means a lower credit score could result in higher premiums, especially in states where this practice is legal.
But don’t panic—some companies offer specialized coverage or discounts that can help you save. If you’re financing, most lenders will require full coverage insurance, so it’s smart to get quotes early from companies like GEICO, Progressive, or The General. Bundling policies or installing anti-theft devices can also reduce your insurance costs, even if your credit isn’t perfect.
Subprime Loans: The Pros and Cons
When your credit score is around 500, you’ll likely be looking at subprime auto loans. These are loans designed specifically for people with poor or limited credit histories. The upside? You get a car and start building your credit by making on-time payments. The downside? The interest rates can be steep, and some lenders may charge extra fees.
To improve your chances, bring a larger down payment, choose a shorter loan term, and consider buying a less expensive car. These moves can help offset your credit score and make you a more attractive borrower.
Tips to Increase Approval Odds
Even with a 500 score, you can take steps to improve your chances of loan approval:
- Check your credit report for errors and dispute anything incorrect.
- Gather proof of income like pay stubs or tax returns.
- Provide personal references if a lender requests them.
- Avoid applying with multiple lenders at once to limit credit dings.
Some lenders also consider your job stability and monthly expenses, so be ready to show that you can handle the payments.
Should You Buy New or Used?
With a lower credit score, it’s usually smarter to go used. Why? Used cars cost less, which means you’ll need to borrow less—and that can make all the difference when you’re being offered higher interest rates. Plus, many certified pre-owned vehicles come with warranties, giving you some peace of mind.
Avoid “buy here, pay here” dealers unless it’s your absolute last resort. These places often charge the highest interest rates and have strict repossession policies. Always read the fine print and know your rights as a borrower.
Let’s Talk About Financing in 2025
Now for the seventh paragraph—and it’s time to talk about car financing in 2025. This year, financing options are more digital and inclusive than ever. Online lenders like Carvana, Auto Credit Express, and MyAutoLoan specialize in helping buyers with lower credit scores.
Many platforms now offer prequalification without affecting your credit, so you can compare rates before making a commitment. Some dealerships are also partnering with lenders that use alternative credit scoring, which means they might consider rent payments or utility bills when evaluating your loan application.
You may also come across second-chance auto loans, specifically designed for buyers with poor credit who are trying to rebuild. While the terms may not be ideal, they offer a path forward—and every on-time payment helps improve your score for next time.
Is a Co-Signer the Right Move?
If you’re struggling to get approved on your own, bringing in a co-signer with better credit can open the door to lower interest rates and better loan terms. Just remember—if you miss payments, it affects both of your credit scores. Make sure your co-signer understands the risks and trusts your ability to pay.
Some lenders even allow co-buyers, which gives you shared ownership and shared responsibility. It’s an option worth exploring, especially if you’re buying a car with a partner or family member.
Final Tips for Getting a Car Loan with a 500 Score
- Start small. Go for a modest vehicle with low mileage.
- Save up. The bigger your down payment, the better your loan options.
- Look local. Credit unions often have better terms than big banks.
- Ask questions. Don’t accept the first offer—shop around.
- Stay current. Make your payments on time to build your credit back up.
Final Thoughts
Getting a car loan with a 500 credit score isn’t impossible—it just takes a little more planning and patience. The auto lending landscape in 2025 is more flexible than ever, with lenders willing to work with all kinds of borrowers. Whether you go through a dealership, a credit union, or an online platform, the most important thing is to understand your loan terms and avoid overextending your budget.
Keep your eyes open, do your homework, and you’ll be on the road in no time—with a loan that fits your wallet and helps you rebuild your credit.
