Trying to get a car loan with bad credit is not going to be easy. You may have to expect some unwanted challenges. But the good news is that there are many ways to increase your chances of getting a car loan even with bad credit. Just because your credit standing isn’t impressive doesn’t mean you can’t qualify for an auto loan. To help you buy that vehicle you’ve always wanted, here are some of the strategies you might find useful.
1. Check your credit report
Knowing your credit score is the very first step to car shopping. Before applying for a car loan, be sure to have the latest copy of your credit report. This will allow you adequate time to work on it if it needs fixing. It will also help you determine the steps needed to improve your score. Working on your credit and transforming it from bad to good won’t happen overnight. But you can start doing something about it as soon as you consider getting an auto loan.
Start by paying off all late accounts in collection. Moving forward, make sure that pay all your bills on time. Being up to date on all your dues can help increase your credit standing in a matter of a few months. Make sure that all details found on your credit report are accurate. Go through the report and see if there are erroneous details. If you spot anything inaccurate, be sure to get it cleaned up by filing your dispute at the credit bureaus.
2. Determine what you can afford
To help you choose the best deal for a car loan, think about how much you can afford. Most people applying for a car loan have the monthly payments at the top of their minds. But, it is not advisable to keep your eyes focused on the monthly payments. Don’t be deceived by low or affordable monthly dues because it translates to longer terms. And longer terms mean a more expensive loan if you will be taking the interest into account. Find out how much a vehicle costs in total and see if it fits your budget. Also, take the down payment into consideration.
Applying for an auto loan with bad credit may require you to pay a minimum down payment. And if you are better prepared with a sizable down payment, you will be able to save on financing costs. You might also want add-ons such as service contracts and extended warranties. Be aware that these financing products will increase the total cost of your loan.
3. Research auto lenders
Getting a car loan with bad credit is a lot easier when you find lenders who lend to people with poor credit scores. Top options include auto dealerships, credit unions, banks and other finance companies. But, because of your credit standing, your car loan is most likely going to come with a higher interest rate. Take time to research the average auto loan rates so you know what to expect.
4. Get pre-approved
Applying for an auto loan is not easy especially when you have less than stellar credit. There are a lot of things to think about. From finding the right vehicle to making arrangements with auto dealerships. The process can be overwhelming. To help relieve the stress, consider getting your loan pre-approved. As a pre-approved buyer, you will already know the terms of your financing when you start shopping.
5. Get a co-signer
A co-signer or co-borrower can improve your chances of getting your loan approved. Even with a poor credit standing. A co-signer is someone who can provide an extra assurance to the lender that the loan will still be paid in full. Even if the borrower fails to do so. It can be a close friend or family member who will agree to co-sign the loan with you.
Bad credit may pose a challenge when it comes to an auto loan application. With the help of these tips, poor credit won’t have the power to prevent you. You can get that car loan approved and drive away in your dream vehicle. For more information about auto loans, please feel free to visit Carfect.