What Are Small Car Loans?

Q: What is considered a small car loan?

A small car loan typically refers to a loan amount of $10,000 or less. These loans are often used for purchasing inexpensive used cars or for buyers making significant down payments. Loan terms may vary, but smaller loan amounts usually result in lower monthly payments and shorter repayment periods.

Q: How can you get a small car loan?

To get a small car loan, check your credit score, compare lenders offering small loan amounts, and apply for pre-approval. Look for credit unions, online lenders, or banks with flexible terms. A significant down payment and proof of income can improve approval chances and secure better loan terms.

Q: What is the smallest car loan that you can get when refinancing your vehicle?

The smallest car loan amount available when refinancing depends on the lender, but it typically ranges from $3,000 to $5,000. Some lenders may require a minimum vehicle value or loan balance to qualify for refinancing. Check with individual lenders to find their specific minimum loan amount policies.

Jason SteeleUpdated January 13, 2025

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent, and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or network providers. Read more about our Editorial Guidelines and How We Make Money.

People who are in a tight spot financially and looking to borrow a relatively small amount of money for an affordable vehicle might seek out a small car loan. Even with a small auto loan, the basics of car loans still apply. Additionally, lenders typically have stipulations for the minimum car loan amount you can borrow, as well as for the car you can purchase. There are both pros and cons to small car loans, and different factors will affect the exact size of the loan you can take out. And if your goal is simply to have lower monthly payments for an auto loan, you have various options available aside from small car loans.

What Is the Smallest Car Loan You Can Get?

Although specifics vary among lenders, your minimum car loan amount generally must be at least $3,000. Note that the selling price of the vehicle can be less than this, but the total amount financed must usually be $3,000 or higher. This is true even for subprime loans, a type of car loan designed for those with poor credit (meaning a score under 580).The reason lenders have minimum auto loan amounts is to encourage borrowers to buy themselves a car with a certain reliability, so that maintenance costs aren’t excessively high and the vehicle is dependable enough to not break down over the course of the loan.

What Factors Affect How Big of an Auto Loan You Can Get?

There are a number of factors that affect how large of an auto loan you can get. This can include:

Credit score
Debt-to-income ratio
Employment status

Auto lenders will require certain documentation to prove the information provided and to determine whether or not they will approve the loan. Documents necessary may include proof of identity, income, residence, and insurance, as well as vehicle documentation.Recommended: How Do Auto Loans Work?

Pros of Small Car Loans

With the cost of living continually on the rise, buying a more affordable car can make sense for your financial situation. If you’re able to find a lower cost vehicle that’s dependable, using a small car loan to attain it can help you avoid the high debt payments that come with financing a more expensive vehicle.

Cons of Small Car Loans

Small car loans may seem convenient, but they come with several drawbacks. Lenders often charge higher interest rates on smaller loans, increasing the total repayment amount. Fewer lenders offer small car loans, limiting options for competitive rates. And finally, securing a small loan may require a strong credit profile or a significant down payment.

Small Car Loan Requirements

As mentioned, most lenders have a minimum financing requirement around $3,000. In addition, most will require that you are purchasing a car that:

Is no more than 10 years old
Has less than 100,000 miles on it
Has a non-branded title (meaning the vehicle does not have a car title indicating it has previously suffered serious damage)
Is a passenger vehicle

Getting a Small Car Loan

When getting a small car loan, you’ll generally need to meet the following car loan requirements for small car loans:

Good credit score: Most lenders prefer a credit score of 600 or higher.
Proof of income: Demonstrating steady income ensures repayment ability.
Minimum loan amount: Many lenders set a minimum loan amount, usually around $3,000.
Vehicle value: The car’s value must meet the lender’s standards.
Down payment: A significant down payment may be required to secure the loan.

Tips for Lowering Your Car Loan Payment

There are several ways you can lower your car loan payment aside from securing a small auto loan. This includes the following:

Save enough money for a large down payment so the total amount you’ll need to finance is lower.
Buy a used vehicle instead of a new one.
Research various lenders to ensure you’re getting the lowest interest rate possible.
Work to increase the value of your car you currently own before trading it in.
Opt for a basic model of your chosen car, leaving behind nice but ultimately unnecessary extras like heated seats or a leather interior.
Consider looking into how to refinance a car if you already have an auto loan but believe that market conditions or your improved financial situation could help you get a better interest rate on your loan. You also could opt to lengthen your loan’s term through refinancing to lower monthly payments.

Recommended: Pros and Cons of Refinancing a Car

The Takeaway

Taking out a small car loan is an option available to borrowers who are looking to finance a low-cost vehicle that meets the requirements set by the lender. A lender’s requirements can dictate the minimum loan amount you must finance and the condition of the car you purchase. Meanwhile, a borrower’s financial situation, including their credit history and employment status, will influence how big of an auto loan they can take out. That being said, taking out a small car loan isn’t the only way to secure lower monthly car loan payments. There are several choices a borrower can make to do so, including choosing a more basic model of a vehicle or saving up for a larger down payment. Refinancing an auto loan is another option available to lower the monthly payments.If you’re considering refinancing your auto loan, Lantern by SoFi can help. With just one application, you can compare auto loan rates from top lenders in our network.Compare personalized auto loan refinance rates today!

Frequently Asked Questions

What is considered a small car loan?

How can you get a small car loan?

What is the smallest car loan that you can get when refinancing your vehicle?

Photo credit: iStock/Ridofranz

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About the Author

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.

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