100% Bad Credit Car Loan Application Acceptance Can You Get a Car Loan with Bad Credit?
Despite having bad credit, it is possible with assistance to get a loan to purchase a new vehicle. For a variety of reasons, nearly one in four individuals in the US is encumbered with bad credit. Typically, credit scores of 620 and lower are considered to be a higher risk and require funding from subprime lenders. Because of that, you will need to set more realistic expectations of making a larger down payment and paying a higher interest rate for the vehicle you desire. However, it is not all bad news. The interest rates that are offered and the level of down payment required are often subject to negotiation. Finding the ideal car loan when having bad credit can be challenging, but it is never an impossible situation. Part of the process of creating accurate and realistic expectations includes not setting your sites on the purchase of a specific vehicle. It is better to be pre-approved by a reputable lender for a car loan before beginning the process of shopping for a car or truck.
Now that the economy has been improving in the last few years, credit is becoming easier to obtain. Many financial sources that were once unavailable have now reappeared in the lending market.
Finding a Lender
There are basic steps that need to be taken in the pre-approval process that you can begin right away. First, check your credit from the three top credit report bureaus to get your scoring. However, recognize that even those numbers are only the starting point. A sub-prime lender will take into account that you have a credit history albeit a tarnished one. The lender may see that there are extenuating circumstances for the bad credit debt no longer exists (i.e. laid off, illness, bankruptcy, divorce, etc.).
You may have been turned down for a home loan in the past and believe that you cannot qualify to receive a car loan. However, automobile loans are offered for a shorter length of time than a home mortgage and are easier to repossess if a problem arises. Because of that, a credit score that is too low to obtain a home mortgage might be high enough to acquire an auto loan. Because of this, it is important to find a lender that understands exactly why your credit is damaged and will offer you a variety of options and interest rates.
Using a Cosigner
If you can bring along a family member or good friend that can bring excellent credit to the lender, you can use them as a cosigner on your loan. Your friend or relative will also be assuming responsibility for your repayment of the loan. However, lenders are often very agreeable to providing auto funding when a cosigner with an excellent credit rating is willing to sign on. In fact, lenders are often willing to offer lower interest rates when a cosigner is involved.
Find a Reputable Dealer
There are car dealers that specialize in assisting individuals with bad credit just like yours. These dealers often work with individuals that are experiencing specific credit problems including home foreclosures, because a have a variety of sources to find the proper lending solution to finance a car or truck. However, it is important to work on every part of the financing detail before selecting a vehicle. This can help you avoid taking on a monthly mortgage payment that might not be suitable for your financial situation.
Setting a Budget
Like the lender, you should know exactly how much you can afford a month for your vehicle. You should have this number firmly in your mind before shopping for a car or truck. More likely than not, you will be paying an excessively high interest rate on the loan.
Because of that, it might be a more prudent decision to find lending for a less expensive vehicle that can be financed for no longer than 36 months then to take on a high monthly payment on an expensive car or truck. This is important for a number of factors including being realistic about the amount of monthly insurance costs involved in covering a higher price vehicle.
Purchasing the Vehicle
With pre-approval from a reputable financial lender, there is one more step to take before visiting the dealership. Call ahead and obtain a list of all the necessary documents that will be required to finalize the sale. With this paperwork in hand, you can visit the dealership, and perform a test drive on your most favorite vehicles available in your price range. This will help to minimize the amount of time you will spend haggling.
Once you obtain your auto financing based on your bad credit, you will likely never want to do it again. Because of that, it is important to start repairing your credit history by making timely payments and clearing up old disparaging debt.