Getting an auto loan with bad credit can be difficult and frustrating. Don't get discouraged or give up. There are several options for you if you have poor credit from specialty finance companies, that have programs for bad credit loans, or buy-here, pay-here lots.
If you have had collections, filed bankruptcy, previous repossessions, collections, or low income; you can still get a car loan. However, when you have bad credit you can expect to pay a higher interest rate on your loan. (A bad credit score is below 640).
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Lenders will charge you more because you are a higher risk due to your poor credit. The higher payments and interest rates are only temporary as you rebuild your credit. If you make your payments on time you can usually refinance your loan, 12 to 24 months later, for a better rate and terms.
Steps to Getting An Auto Loan With Bad Credit.
1. Be realistic to what you can really afford. Many car buyers get frustrated because they think the bank will loan them more money, then what they actually will loan. You are going to be limited to the amount you can borrow and what car you can and can't buy.
2. Check your credit report and make sure you know what's in your report before you go shopping for a car. You can get a free report once a year at AnnualCreditReport.com, this report won't give you your credit score, however it will give you valuable information about your credit history. If you find anything on your report that shouldn't be there, by all means dispute it with the credit bureau and have it removed.
3. Start putting away cash for your down-payment and see how much you can come up with before buying your car. The more cash you can put down, along with your trade-in, the less money you will have to borrow. A low-mileage, inexpensive newer-model car will carry a lower monthly payment, since a newer used car will last longer and therefore you can get a longer term on the loan. Keep in mind that doing this will add to the cost of your loan because you will be paying more interest over the extended months. It's always best to apply for the shortest term that you can afford monthly.
4. Search online for programs and lenders that deal with bad credit loans. Check out their websites and see what services they have to offer for getting pre-qualified for a loan.
Before going with a company, search online for customer complaints or problems with the company to make sure you are dealing with a reputable lender.
Here's a professional tip that can save you money. Do not, and I repeat, do not ever pay to apply for a loan. There are plenty of lenders out there who will help you get a loan with no upfront fees or charges.
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