Bad Credit Car Loan
How to Get a Car Loan With No Credit or Bad Credit
If you have bad credit or no credit, you may be wondering how you’ll ever get approved for a car loan. High interest rates and large monthly payments may have scared you away. With a little prep, however, getting an auto loan with bad credit or no credit is possible. Follow this guide to learn how.
Order your credit reports. Having your credit reports can give you a detailed picture of where you stand, and can help you pinpoint any errors that may appear on the reports. You can then address these errors before you approach lenders. The three major credit agencies offer free reports once a year.
Pay for your credit scores. Seeing your credit score will cost a few dollars, but it can be worth it to get an idea of how the lenders will treat you. Your scores will likely vary slightly between the credit agencies.
Make all your payments for other bills. Before you go loan shopping, make an effort to pay all of your other bills on time for at least six months. While this won’t have a major impact on your credit, it will show the lenders that you have been responsible lately, and may help get you the loan.
Go to your bank first. Check with your financial institution before going to the dealership or other lenders. Your bank may be able to give you favorable terms, and will usually help their customers more than they would a stranger.
Check with your insurance company. Some insurance companies offer financing as well. Check with them because, like financial institutions, they are more likely to treat their own customers more favorably.
Shop around. Don’t take the first loan you are offered, especially if the terms aren’t very good. It will be harder to find a loan with bad credit, and most will come with high interest rates. Try to get your financing before approaching the dealership, as dealership loans are likely to be more expensive.
Try well-known institutions before trying loan shops. Go to reputable banks and other financial institutions before trying lenders that specialize in bad credit. Focus on institutions that are known for dealing heavily in auto loans.
Focus on the terms and not on the monthly payments. If you get low monthly payments, but have to pay the loan back for more than 7 years, it’s probably not worth it. You want to try to find the loan that will give you the lowest interest rate and the shortest monthly payments.
Make sure terms are final. Some dealerships will increase the monthly payments on your car after a few months. Always read the fine print to ensure that you aren’t getting tricked into a more expensive payment situation.
Refinance your loan. After a year of making payments on your loan, you can attempt to get it refinanced. This is especially useful if your financial situation and credit has improved since you took on the loan. Even lowering the interest rate by 1% can save you lots of money in the long run.