One of the most questions asked by people who have bad credit scores is whether they can still apply for an auto loan. That’s because a significant percentage of the American population has low credit scores.
However, what you need to know is that even with a bad credit score, you can actually still be qualified for an auto loan. That’s because your qualification for an auto loan will depend on your own set of circumstances, and poor credit does not mean it’s impossible for you to buy a car. The meaning of “bad credit” may be subjective depending on the lender and their criteria.
How to get an auto loan with a low credit score?
The first thing you need to do if you want to get a car loan is to shop around, so you can have an idea about the interest rates and you can start comparing.
And if you want to make sure you can get your dream car with a low credit score, here are some tips you may want to consider.
1. Don’t believe everything that you hear
People might say that it’s impossible for you to purchase a vehicle because your credit is bad. That is not the case because you might even have better chances of getting your loan approved than someone who has a good credit score. It is always a case-to-case basis.
2. Shop around
Do not settle with the first lender who had your car loan approved. Different lenders may have different ways of looking at your credit history, and that is the reason why it is important that you shop around.
3. Start within your community
When looking for a place where you can get a car loan, start with the bank or credit union closest to you or wherever you already have a checking account.
4. Explore your other options
Instead of going straight to lenders, check out your other options for car loans. You may still be able to get assistance from local and national banks, or reputable online lenders.
5. Ask help from friends and family members
Trying to get an auto loan is not something that you really have to do alone, especially when you know some people who have been in the same situation. Don’t hesitate to reach out and ask for their help as they may be able to share more useful information with you. Aside from this, they can help you with the negotiation on the loan terms, especially when it does not seem fair.
6. Focus on loan terms instead of the monthly payments
When looking for the cheapest price, focus on is the yearly percentage of your loan based on the shortest period covered. Don’t focus on the low amount that you will have to pay for every month. Monthly payment seem low however it changes as time passes by. Interest rates get higher resulting to a poor decision made.
Don’t get carried away by the promises of low monthly payments. Think about how much you will pay for the interest and the overall cost of the vehicle.
7. Check what add-ons are included
You have to be wary of the unnecessary goods and services included in your lending contract. Make sure that you are not purchasing anything that is not necessary like extended warranties, insurances, and others.
8. Ensure the terms are final
If you transact through a dealer, make sure that the contract of agreement you are signing is final. It should not be contingent and conditional. There are cases where buyers just get surprised. After a few months, changes happen with their rates. Or, an increase in the required down payment happens.
There are even times when the interest rates just suddenly spike. This event is usually referred to as a “yo-yo scam” and you need to be careful so that you don’t get trapped. Do a background check on the dealer. This helps in making the right decision. You avoid becoming a poor victim of their scam.