How to get an auto loan with bad credit
Even with a bad credit score it’s possible to get a car loan. You will have a better chance to be considered if you use lenders who regularly specialize in working with people who have challenged credit
A car loan that doesn’t ruin your budget is still possible, even with bad credit. To start with, keeping your car loan payments consistently paid can go a long way towards repairing your credit. In some cases, we must get you into a car that might not be your “dream car” but one that fits your present budget so you can make payments for a year to bring up your credit score. This will be a stepping stone to your perfect car.
Below you will find some tips for getting approved for a car loan with bad credit:
Knowing your credit score
It’s critical that you know your credit score before you begin the shopping process. myBankrate is just one tool that offers free credit reports, and it can also explain to you the factors that determine your score.
It’s possible that some of these factors can be addressed immediately, such as a history of delinquent payments. Making efforts to resolve these issues can help ensure that some lenders give you a more favorable position. At Pensacola Bad Credit Car Loans we have several methods that we can talk to you about which can improve your credit score, for example, we can help you get a better credit score just by being able to prove that you paid rent on your home and had good a good payment history. Ask us about “Rent to Credit.”
Lenders run strict checks during the application process, so it’s important to act quickly. Credit bureaus are informed when a hard credit check is done, and that check signals that a borrower is soon to accrue more debt, resulting in a slight drop in your credit score. If you wait too long in the process, negotiating for more favorable terms could become more difficult. Visiting three different lenders in a 14-day period is recommended for your credit safety. Get your ducks in a row before you start the process and do your research. Look at the reviews on websites and see if people are happy with their experience before you talk to that business about buying a car.
Ensure that the terms are final
Make absolutely certain that the terms are final if you choose to finance through a dealer. You may experience an increased down payment or higher monthly payments if you don’t.
In what’s called a “yo-yo scam,” buyers are told that their financing is not yet complete, and that they must then sign for a higher interest rate.
Avoid Buy Here, Pay Here plans
We recommend that you avoid the BHPH plans because the payments you make directly to the dealer may not be reported the credit bureaus. If your timely payments are not reported, you won’t see any improvement in your credit score. You want every on time payment to add up to a better credit score!
Many buyers are enticed by lower monthly payments, but you should know that lower payments can lead you to paying more for your car over the period of the loan. Many times a person’s financial situation won’t allow them to pay higher monthly payments. Try to find a dependable car with payments that you can make ON TIME so that you can use those payments to help you improve your credit score.
Bring a friend, and consider a cosigner
Yvonne Rosmarin—a Massachusetts-based consumer attorney—suggests bringing a friend or relative with you. Having someone that you trust at the negotiation can boost your confidence, and confidence and knowledge together can lead to a more favorable loan.
If this is a person that you particularly trust, you could even ask them to be a co-signer. For lenders, cosigners help reduce much of the risk of the loan. If you should ever default on your payments, the cosigner will become responsible for the loan. This can be a strong negotiating tool, and typically leads to lower interest rates.
Before taking on a cosigner, however, be absolutely certain that you can consistently make payments. Leaving your debt on your cosigner can permanently damage your relationship with that person.
Beware scams and add-ons
Extended warranties, after-market services, or even insurance should never be the contingent factor for a loan.
You don’t have to get bad terms for bad credit. If you have bad credit, it may unfortunately be more difficult for you to get a car loan, and you will likely encounter less favorable loan terms.
If you arrive at the negotiating table with knowledge and preparation, you can find a loan with favorable terms. The first thing you need is to find the loan that works best for you, and begin paying it off and thus boost your credit score. If you consider refinancing at that point, you may even find a loan with better terms.