Private transportation is sometimes not a luxury but a necessity. You may need it for work or maybe just family life in the city. Regardless of your intentions, the fact is that you need a private means of transportation. A car loan is one of the easiest ways to get a car. But securing a car loan is highly dependent on your credit score. Having a bad credit score can mitigate your chances of securing a loan. But there is always a way out. People with bad credit still get approved for car loans. Although it may seem daunting, but by following some basic steps, you can drastically improve your chances of getting the loan, hence the car.
Credit scores are one of the cardinal factors considered by lenders when deciding whether to offer a car loan or not. FICO Scores, which is one of the most commonly used credit scoring models, have a range from 300 to 850. Using this scale as a reference, a score of 669 or below is regarded as fair or poor. A score like this may not give you the eligibility that you require for a car loan, but with proper research, you should be able to find a loan that would be apt for you.
Check your credit scores
This is the smartest first step you must take before you go ahead to apply for a loan or make any major purchase. With a copy of your credit report and score, you would have a good idea of where your credit falls, either excellent or poor. This would give you the confidence to apply for loans that suit your credit scores.
Improve your credit scores if you can
If your credit score does not fall on the excellent part of the spectrum and you are not in a hurry for a car, then perhaps you can spare some time to improve your credit scores before you apply for a loan. An improved credit score will give you access to loans with better terms and a lower interest rate. Below are a few tips to improving your credit scores;
– Pay your bills on time
– Reduce your debts as much as possible
– Check your reports for errors
Research different auto lenders
There are lenders who specialize in serving people with low or poor credits. If you are having difficulties securing a car loan from the conventional lenders, then perhaps you need to consider these specialized lenders. Although they may offer loans at a pretty high-interest rate, they come in very handy for people with poor score who need a car as quick as possible.
Research for a dealership who indicate interest in working with people with poor credit. These dealerships may finance the loans themselves or may have an agreement with lenders that specialize in working with subprime borrowers.
Put down a substantial down payment
By putting down a substantial down payment, you would be able to lower your monthly payments, shorten the term of your loan or secure a better interest rate. When weighing the risk of granting you a loan a lender will consider the down payment you made for the vehicle. This would be regardless of your poor credit. Therefore, it is advisable that you save for a down payment, as this could be the difference between getting approved for the loan you need or not.
Know what you can afford
Before you opt for a car loan ensure that you have a good idea of how much you can afford as monthly payment. This would help you to choose a vehicle that is within your price range. It is equally important that you have an idea of current average car loan interest rate such that when it comes to time to negotiate, you have a fair knowledge of what you can afford.
Find a second-chance car loan
The name of the loan gives a fairly good description of what it does. It is meant to give people with bad credit a second chance. Perhaps you have been turned down repeatedly by conventional car loan lenders, a second-chance car loan lender may be your only other option. These lenders will provide you with a finance option that you are most likely guaranteed to get approval for.
Although this type of loan may be a good option for someone with bad credit, they usually come with clauses that make them unappealing, such as very high-interest rates and fees. To find these types of loans you may need to browse online.
It is important that you know that getting a car loan would impact your credit, this could either be positively or negatively, depending on how you handle your repayment. Your new loan will be listed in your credit report and most likely your payment history will be reported to the major credit bureau by the lender. Your payment history will equally form part of your credit report, therefore it is important that you make all your payments on time.