There are credit institutions who may be willing to offer you car loans for bad credit. Before proceeding further, let’s state here, that you will need to take some steps to actualize this.
What To Do Before Applying For Car Loans
Check/Improve Your Credit Score
First of all, you have to check your credit score and improve them if they are not in good shape. This you can do by getting a free copy of your credit reports to know just how you fare. If you need to improve your credit score, you have to do the following;
- Always check your credit report for errors.
- Reduce your debts as much as you can.
- Use tools like Experian Boost™ to improve your score automatically by adding utility and phone bills to your credit file
- Make timely bill payments and also pay off missed or late payments or accounts in collections.
Search Out Different Auto Dealers
The next thing to do before applying for a car loan, it research on different auto lenders. Scout out lenders that are willing to lend to people with bad credit. Note, that this lenders typically offer loans at higher interest rates, but can help people with poor credit scores who are in need of a car. Go online and search out these dealers and you’d find some who are willing to lend to people with bad credit.
Get a Down Payment
Ensure you have enough money for a down payment. This can help lower your monthly payments, and get you a better interest rate as well as shorten the term of your loan. A down payment is one major factor lenders consider before giving you a loan and saving for one can make the difference you need.
Stay Within a Comfortable Price Range
Go for what you can afford, by getting an idea of what the loan payment entails. This will enable you choose a car in your price range.
Options For Getting Car Loans For Bad Credit
Go For a Second-Chance Car Loan
There types of loans keep to their promise and give people with bad credit a second chance. A Second-Chance lender will strive to offer you with finance options that you are most guaranteed to get approved for. Note, a Second-Chance loan may also come higher interest rates and fees.
Try Using a Credit Union
You can finance your car purchase with a credit union, because they offer loans with good terms and low interest rates for people with bad credit. Check with the credit union you’d love to join to know if you are eligible for a membership and contact them and ask information about their requirements. Note, some credit unions may be restricted based on where you live, your employer, or any other groups you may be affiliated with.
Use a Cosigner
You can try using a Cosigner with a good credit history. This will increase your chances of getting approved for a car loan as well as help you get a better interest rate. The Cosigner acts as your guarantor if you default in the loan payment and this will boost the confidence of the lender to lend to you.
When you choose the car at a particular dealer, you also finance it there as well. Here, the dealer is the your finance company. The same company makes the decision to approve your car loan and also profits from the car sale which means that will more flexible in giving to people with poor credit scores. Note, here interest rates are much higher with dealers than with other lenders, there may be specific payment instructions that you may need to pay in person and if payments are missed, the car maybe repossessed.