Car Loan Options With a 500 Credit Score

Finding yourself with a 500 credit score can feel like a roadblock when you need a car. You might wonder if any lender will take a chance on you. The good news is that auto financing is still possible, though the terms will differ from what someone with excellent credit receives. Lenders who specialize in subprime lending look beyond the number to your income, stability, and down payment. Understanding what kind of car loan you can get with a 500 credit score is the first step toward driving away in a reliable vehicle without falling into a predatory loan trap.

Many people assume a low score means no loan at all, but the auto lending market is more flexible than that. Dealerships and online lenders have departments dedicated to borrowers with credit challenges. The key is to know what to expect so you can negotiate from a position of strength. This guide walks you through the loan types, interest rates, down payment requirements, and strategies to improve your chances of approval. Whether you need a car for work, family, or daily errands, there is a path forward.

What a 500 Credit Score Means for Auto Lenders

A credit score of 500 falls into the poor or subprime range on most scoring models. Lenders see this as an indicator of past missed payments, high credit utilization, or negative items like collections. Because of this perceived risk, they charge higher interest rates to protect themselves. However, auto loans are secured by the vehicle itself, which reduces the lender’s risk compared to unsecured debt. This security makes them more willing to approve borrowers with low scores.

Lenders will evaluate your entire financial picture, not just the score. They look at your debt-to-income ratio, employment history, and whether you have a steady paycheck. A stable job and a reasonable down payment can offset a low credit score. Some lenders also consider alternative data like rent payments or utility bills. The loan amount is typically limited to the vehicle’s wholesale value rather than its retail price, so you will likely need to choose a car that is a few years old rather than a brand new model.

Types of Car Loans Available With a 500 Credit Score

When you ask what kind of car loan can i get with a 500 credit score, the answer depends on the lender type and your financial situation. The most common options include subprime loans from buy-here-pay-here dealerships, credit union loans with a co-signer, and online lenders who specialize in bad credit auto financing. Each has its own pros and cons.

Subprime Loans From Specialized Lenders

Subprime lenders work specifically with borrowers who have low credit scores. These loans come with higher interest rates, often ranging from 10% to 25% or more, depending on the lender and the vehicle. The loan terms are usually shorter, around 36 to 60 months, and the down payment requirement is higher. You should expect to put down at least 10% to 20% of the vehicle’s purchase price. Some lenders may require a down payment of $1,000 or more. The advantage is that these lenders report your payments to the credit bureaus, giving you a chance to rebuild your credit over time.

Buy-Here-Pay-Here Dealerships

These dealerships act as both the seller and the lender. They do not check your credit with the major bureaus or they use their own scoring system. This makes approval easier, but the trade-off is a higher purchase price and a very high interest rate. The vehicle itself may be older with higher mileage, and the loan terms can be as short as 12 to 36 months. Some buy-here-pay-here lots require weekly or bi-weekly payments. While this option gets you a car quickly, it is often the most expensive path long-term. Use this only if other options are exhausted.

Credit Unions and Co-Signers

Credit unions are member-owned and often have more flexible lending standards than banks. If you can join a credit union, they may offer a loan with a lower interest rate than a subprime lender, especially if you bring a co-signer with good credit. A co-signer agrees to take responsibility for the loan if you default. This reduces the lender’s risk and can lower your rate significantly. Some credit unions also offer credit-builder loans specifically designed for people with low scores. If you have a family member or close friend willing to co-sign, this is one of the best options for getting a reasonable rate.

Interest Rates and Loan Terms You Can Expect

Interest rates for borrowers with a 500 credit score are higher than average, but they vary widely by lender and vehicle. The national average for a new car loan in 2025 is around 6% to 7% for prime borrowers. For subprime borrowers, the rate can be 12% to 20% or higher. A used car loan typically carries a slightly higher rate than a new car loan because the vehicle depreciates faster. Your loan term also affects the rate. Shorter terms usually have lower rates, but the monthly payment is higher. Longer terms reduce the monthly payment but increase the total interest paid over the life of the loan.

Here are the typical loan terms you might encounter with a 500 credit score:

• Interest rates: 12% to 25% APR depending on lender, vehicle age, and down payment.
• Loan term: 36 to 60 months for used cars; 48 to 72 months for new cars, though new car approval is less common.
• Down payment: 10% to 20% of the purchase price, or $1,000 minimum.
• Maximum loan amount: Typically limited to the vehicle’s wholesale value or $15,000 to $25,000.

These terms mean you should focus on a reliable used car that costs between $8,000 and $15,000. This keeps the loan amount manageable and increases your chances of approval. A larger down payment also helps reduce the loan-to-value ratio, which lenders like. If you can put 20% down, you may qualify for a slightly lower rate.

How to Improve Your Approval Chances

Even with a 500 credit score, you can take steps to strengthen your application. Lenders want to see that you can afford the payment and that you are likely to make it on time. Start by checking your credit report for errors. A surprising number of reports contain mistakes that drag down your score. Dispute any inaccuracies with the credit bureaus. Next, save up for a larger down payment. Every dollar you put down reduces the lender’s risk and may lower your interest rate. A $2,000 down payment on a $10,000 car shows you have skin in the game.

Consider getting pre-approved through an online lender or credit union before you visit a dealership. Pre-approval gives you a clear picture of the interest rate and monthly payment you qualify for. It also prevents the dealership from marking up the rate for profit. If you have a co-signer, bring them to the dealership or include them on the application. Their good credit can help you secure a much better deal. Finally, choose a vehicle that is practical and affordable. Avoid luxury cars or expensive SUVs that stretch your budget. A reliable Honda Civic, Toyota Corolla, or Ford Focus from the 2015-2019 model years is a smart choice.

If you are already a car owner with a high-interest loan, refinancing might be an option once your credit improves. In our guide on car loan rates for 800 credit score top refinance perks, we explain how a higher score unlocks lower rates and better terms. Even if your score is 500 now, consistent on-time payments on your current loan can boost it over time, making refinancing a possibility in the future.

Hidden Costs and Pitfalls to Avoid

When you have a low credit score, some lenders try to take advantage of your situation. Watch out for loans with prepayment penalties, which charge you a fee if you pay off the loan early. Also avoid loans that require a large balloon payment at the end of the term. These can leave you owing more than the car is worth. Another common trap is the “yo-yo” financing scheme, where the dealer lets you take the car home and then calls you back to say the loan fell through and you need to sign a new contract with worse terms. Always read the contract carefully before signing, and never agree to a payment you cannot afford.

Extended warranties and add-ons like GAP insurance are sometimes pushed aggressively. While GAP insurance can be helpful if you owe more than the car’s value, you can buy it from your auto insurance company for much less. The same goes for service contracts. Stick to the base price and negotiate the interest rate and term first. Once those are set, you can decide on extras separately. If a dealer pressures you into a deal that feels wrong, walk away. There are always other lenders and other cars.

Frequently Asked Questions

Can I get a car loan with a 500 credit score and no down payment?

It is very difficult to get a car loan with no down payment when your credit score is 500. Most subprime lenders require at least $1,000 down or 10% of the purchase price. A down payment reduces the lender’s risk and shows you are committed. Without one, you will likely be turned down or offered a loan with an extremely high interest rate. Save up as much as you can before applying.

What is the average interest rate for a car loan with a 500 credit score?

The average interest rate for a borrower with a 500 credit score ranges from 12% to 25% APR, depending on the lender, the vehicle, and the loan term. Rates on used cars tend to be higher than on new cars. Shopping around and getting pre-approved from multiple lenders can help you find the best rate available to you.

Will a car loan with a 500 credit score help me rebuild my credit?

Yes, if you make all your payments on time, a car loan can help rebuild your credit. Payment history is the most important factor in your credit score, accounting for 35% of the total. On-time payments over 6 to 12 months can raise your score significantly. Just be sure the lender reports to all three major credit bureaus: Equifax, Experian, and TransUnion.

Should I use a buy-here-pay-here dealership?

Buy-here-pay-here dealerships can be a last-resort option if you cannot get approved anywhere else. They rarely check credit, so approval is almost guaranteed. However, the interest rates are very high, the cars are often older with higher mileage, and the loan terms are short. If you can qualify for a subprime loan from a traditional lender or credit union, that is usually a better choice. If you do use a buy-here-pay-here lot, plan to refinance with a lower-rate lender as soon as your credit improves.

Can I refinance a car loan with a 500 credit score later?

Refinancing is possible after you have made several months of on-time payments and your credit score has improved. Most refinance lenders require a minimum score of 580 to 600, but some may consider borrowers with lower scores if they have a strong payment history on the current loan. Check your score every few months and compare offers. When your score reaches 600 or higher, you may qualify for a much lower rate.

If you are looking for a trustworthy partner to help you find the best loan terms, consider exploring resources like Doctors Home for additional financial guidance and support. For auto-specific options, CarLoanRefinancing.com connects you with a network of lenders who work with all credit levels.

Getting a car loan with a 500 credit score is not impossible, but it requires preparation and realistic expectations. Focus on a modest vehicle, save for a solid down payment, and consider a co-signer if possible. Avoid predatory lenders and read every contract carefully. Most importantly, use the loan as a tool to rebuild your credit. With consistent payments, you can raise your score over time and eventually qualify for better rates. The road may be a little longer, but you can still get behind the wheel of a reliable car and drive toward a stronger financial future.