How to Get a Better Auto Loan if You Have Bad Credit
No matter how hard we may try, things don’t always go our way. The high cost of living, rising insurance costs, skyrocketing taxes, and dwindling finances all lead to the same path for some of us: the path of bad credit. Once you have a bad credit history, it becomes increasingly more difficult to acquire loans, mortgages, new credit cards, or increased credit limits. If you are in the market for a car and need a loan, don’t despair. Fortunately for you, there are ways to improve your chances not only of acquiring a car loan, but also, of acquiring a car loan with reasonable terms. Even for you, the bearer of bad credit, specific strategies can bring you closer to the car loan that you need.
Simply follow as many of the suggestions as you can to increase your chances of acquiring a better car loan, a loan with lower interest rates. Some of the strategies should be completed before you go in to ask for the loan, and other strategies should be followed when you are applying for your car loan. Don’t worry if some of the strategies don’t seem possible for you to follow. It isn’t necessary to complete all of them to improve your chances.
Strategies to Follow before You Apply for Your Auto Loan
Obtain your credit score so that you know what you are dealing with in regard to your credit score. Each of the three major credit bureaus, Trans Union, Experian, and Equifax, offer consumers a free credit report once a year. Contact one of these bureaus to obtain your credit report.
Improve your credit score as much as possible. To improve your chances of receiving a more agreeable interest rate, as well as a lower required down payment, then attempt to improve your credit score as much as possible before applying for the auto loan. Granted, this may take some time, but any positive effort can only make a favorable impression. In general, the higher your credit score, the better your chances of obtaining a loan with favorable terms.
Secure a steady job with a steady income. Lenders are going to expect anyone who applies for a loan to have a steady job. If you don’t have one, get one. In fact, individuals who can show that they have held the same job for over ninety days have a better chance of being offered favorable loan terms.
Increase the size of your down payment as much as possible. The amount of money that you place on the car provides the security the lender needs in order to offer you a loan. Larger down payments provide greater equity or security for the loan.
Comparison shop. Different lenders will offer loan packages with varying terms. Even if you have bad credit, shop around and see which lenders are offering the best terms for auto loans.
Apply for pre-approval for an auto loan. It is possible to receive pre-approval for an auto loan. This will take out the stress and mystery of wondering what the car dealership is going to offer you for a loan.
Consider a sub prime lender for your loan needs. Sub prime lenders make a living out of dealing with individuals who have bad credit. The possibility of receiving approval for an auto loan is probably very good when dealing with a sub prime lender.
Strategies to Follow when You Apply for Your Auto Loan
Purchase a used vehicle instead of a brand new one. Since used vehicles usually have a lower price tag attached to them, the auto loan that you need in order to make your purchase will be smaller. A smaller loan translates to smaller monthly payments. Typically, smaller monthly payments are more affordable and less of a risk for the company that is considering extending an auto loan to someone with less than stellar credit.
Arrive at the car dealership with a co-signer who has a good credit history. Since co-signers of a loan are held responsible for the loan should the primary borrower fail to pay, it may be difficult to get someone to agree to co-sign for you. However, the presence of someone who is willing to trust your financial stability should improve your chances of acquiring an auto loan with good terms.
Use a reputable or well known company for your auto loan. Typically, companies that have a long standing record of providing services to the community also offer better terms for their borrowers. These companies have not made it to where they are with questionable practices.