How to Get an Auto Loan with a Low Credit Score
- May 4, 2018
- Bad Credit, Car Loans
- Posted by The Auto Warehouse
- Comments Off on How to Get an Auto Loan with a Low Credit Score
You can have bad credit due to a variety of reasons. It could be because of late payments to lenders. You may have a lack of credit history, erroneous information on your credit report or even identity theft. Regardless of the reason, having less than stellar credit scores may affect you, especially when you’re planning to apply for a car loan.
But don’t worry! There are strategies you can use to find a car loan even with bad credit. And here are a few you can use right now.
Check your credit report
Even if a dealership has told you that you have bad credit, it is still best to perform your own credit check. You are allowed to request a credit report from the major credit bureaus once every twelve months. Check your score and understand what caused the bad credit.
Also, take a look to see if there is any suspicious activity on the report or if there is any inaccuracy. If you do spot an error, have it disputed right away. If everything is correct, bring the credit report during your meeting with the potential lenders. A lot of dealerships will still be willing to work with you if you make them understand the reason behind the low credit score.
Figure out how much you can afford
Before you even apply for a car loan, determine the amount you can afford and how it will affect your monthly budget. Be careful not to get fixated on the monthly payment. Some auto loan terms may offer much lower monthly payments but come with a longer term. If you compute for the total amount of the car loan, it is more expensive when the interest is taken into account. Also, think about the other costs included such as financing charges. Plan ahead and determine if you will need some add ons such as extended warranties and GAP coverage.
Having bad credit doesn’t mean that you can no longer get a car loan. Also, don’t immediately assume that your credit is bad. Your understanding of bad credit may not be the same as your lender’s understanding. So take time to do research and shop around. Find out the different rates offered by different lenders. Compare prices to find the best deal. Also, check on the lenders that accept applications from people with poor credit scores. And don’t forget to check your main options which include banks, credit unions, and other financial institutions.
Limit your search to a 14-day timeframe
Taking your time to shop around enables you to compare different offers from various lenders. But, make sure to limit your search to a timeframe of 2 weeks or 14 days. This will protect your credit score from getting further damaged. When you apply for loans, lenders will check your credit score. Every instance of credit check affects your credit score. And if you apply for a loan over a long period of time, your score could get even lower. The best thing to do is to apply for loans when you think you’re almost ready to take one out. Otherwise, you are doing your credit score more harm than good.
Get a pre-approval
Making arrangements with the right financing and finding the right car can be stressful. But you can relieve that stress when you get pre-approved for an auto loan. As soon as you are pre-approved, you can already start shopping for a vehicle because you are already aware of the terms of the financing. This will give you the chance to focus on negotiating and finding the best deal for the car.
Look for newer vehicle models
An older vehicle may cost less at face value. But the truth is, these are the cars that usually charge higher interest rates than the new ones. Shop for newer cars first and look for the best financing for the model you have chosen.
Having a low credit score may make it difficult for you to get that dream vehicle. But you can follow these steps to get that auto loan with bad credit. Looking for the best car deals? Please visit The Auto Warehouse.