5 Steps to Get a Car Loan with a Bad Credit
- March 9, 2018
- Car Loans
- Posted by The Auto Warehouse
- Comments Off on 5 Steps to Get a Car Loan with a Bad Credit
Have a bad credit history? You may think it’s impossible to get a car loan. But you don’t have to lose heart when it comes to dealing with bad credit auto financing. Just because you don’t have an impressive credit standing does not mean that you can’t qualify for car loans. In fact, even if your credit history is less than stellar, there are some car loans you can still get without ruining your monthly budget.
To help you get approved for your auto loan, here are some strategies you could use.
Take time to understand your credit score
Your credit score is a tool to measure your creditworthiness. But, it does not tell everything about you. Several things are taken into consideration when calculating your credit score. They include your credit utilization, payment history, type of credit, length of credit history, etc. So it pays to get this information as early as possible and take time to understand it. Take a closer look at your credit report and see if there are errors. If errors appear, make sure to dispute and report them to the credit bureaus.
But if your credit score is just really low, don’t worry because there are steps you can take to increase it. For example, you can start paying off your credit cards to lower down your credit utilization. (Credit utilization is the ratio of your credit card balances to credit limits. It measures the amount of your credit limit that’s being used.)
Look for a car that you can afford
Before you even apply for an auto loan, consider your budget and decide on what you can afford. Aside from your credit score, the approval of your loan will also largely depend on your ability to pay. Lenders will take a look at your monthly income and expenses to help them determine the amount to lend you. Even if you get approved for a higher amount than you expected, do not deviate from your initial budget plan. This will help ensure that you won’t be breaking your monthly budget.
Pay a bigger down payment
One of the most common mistakes of people who are trying to apply for a car loan? They finance it with the lowest amount of down payment. With a bad credit history, you need be ready to pay a sizable down payment. But if you can’t afford it yet, it means that you are not yet financially ready to buy a vehicle. You might want to wait a few months more so you can have bigger savings for your down payment. Besides, the value of the car you’re eyeing to buy might also depreciate in the next couple of months and that means more savings for you.
Shop around for a suitable lender
Loan rates vary for borrowers with bad credit history. So take the time to shop around. You may want to start checking with your own bank or credit union and see how much they’re willing to offer. If you don’t get approved, you can start checking reputable auto lenders. One thing you shouldn’t forget? Make sure you don’t take the first offer. Continue to shop around and compare offers. Multiple credit inquiries may affect your credit score. But this doesn’t mean you should hold back in filling out a number of credit applications. In fact, your credit score shouldn’t suffer so long as the inquiries are made within a two week period.
Try getting your car loan pre-approved
Finding the best financing as well as a vehicle that will suit your needs is more difficult when you have bad credit. But to help ease the stress, you can also opt to get pre-approved for your auto loan. As a pre-approved buyer, it will be a lot easier for you to shop around because you already get an idea of the terms of your financing. This will also allow you to focus on negotiating for the price that your budget can afford.
Buying a car with a bad credit is no longer impossible with the help of these tips. If you need help in getting a pre-approved car loan, please visit The Auto Warehouse.