How to Get a Car Loan with Bad Credit?
Having bad credit might seem like the end of the world when it comes to getting a car loan, but it doesn’t have to. More often than not, it’s necessary to know that even individuals with substandard credit can get approved day in and day out and there’s no need to be discouraged if your odds seem unlikely.
In this blog, we will share some crucial steps on how to get a car loan with bad credit to increase the chances of finding one that works out for you.
But before we dive deeper into this topic, it’s important for you to understand: What is bad credit?
Bad credit is any past due amounts that you have failed to pay off, these can be late car payments, resulting in the disapproval of any new car loan that you want to obtain. One of the reasons for this rejection is below- par credit scores. Each lender determines what a good or bad credit score is for them. It’s important to note that the higher the score the better the credit score.
Here is a general breakdown of it:
- Excellent: 700 to 850
- Good credit score: 680 to 699 (Average American score is 682)
- OK credit score: 620 to 679
- Low credit score: 580 to 619
- Poor credit score: 500 to 579
- Bad credit score: 300 to 499
So now that you’ve wrapped your head around credit scores and want to start finding the perfect car loan, there are a few more things to take into consideration that involve you to do a bit of research and planning.
1. The first and foremost step when starting the process is to go over your credit scores and try to improve them if you can:
Checking on these gives you a brief idea about where your credit situation is at the moment, whether it’s good or bad.
Why do you need to check this? Because you will get a better idea on how to apply for a loan that perfectly complements your credit profile and if getting a new car loan isn’t something that’s on top of your priority list right now, make an effort to improve them to save more money and to get the lowest interest rate.
Here are a few things our experts recommend on how you can improve your credit score:
- Any late payments or missed ones can be paid off: One of the most ultimate ways to better off your score is making sure your payment history is as good as it can be.
- You need to take the edge off that debt as much as you can: This not only ensures you find yourself in a better monetary situation but also improves that credit utilization ratio. This is the ratio that is measured by dividing the credit being used by you to the total credit available (i.e. credit limit). Keeping this ratio anywhere below 10% or 30% will give you the best score outcome.
- Check for any errors in your credit score: Errors are bound to happen sometimes, and this is one of them that can drag down your credit score. Fixing these can help improve your score.
2. Research a variety of car lenders:
If you’ve had difficulty getting a car loan approved with bad credit from ordinary lenders, it’s time to rely on lenders that focus solely on loans from individuals with poor credit. Some dealerships also have settlements with lenders who are dedicated to being of service to people in situations just like yours.
3. Be aware of what you can afford or the one that fits your budget range:
Don’t go overboard and put your hands on the first car loan you find, even if it seems irresistible. It’s important to do your research on the current terms and interest rates so when it’s time to negotiate; you know what car loan you can or cannot afford to save you some trouble in the long-run.
So what can you do to get a car loan with bad credit?
If you need a car loan with bad credit immediately and don’t have enough time for you to improve your credit score, then here are a few options that might help:
1. Look for a second-chance loan:
Yes everyone deserves second chances, even individuals with bad credit. If your conventional lender has not approved your car loan, second chance credit lenders can help give you financing options that will help rescue you from the situation you’re in, although it comes with its set of downsides as these can be loans with high-interest rates and fees.
2. Contemplate upon signing up a co-signer:
Cosigners are usually people with good credit that help you increase your chances of getting approved with better terms and interest rates and a decrease of the burden. Their basically saying that if you can’t pay that debt off- they’ll pay it for you. Sound like angels indeed!
But it’s necessary to note that this new debt will be visible on both your reports and impact both of your credit scores if it’s not paid on time. Cosigners are very helpful when it comes to getting a car loan with bad credit but make sure you both pay it off on time, so you don’t risk your credit scores.
3. Never take out a loan that you can’t repay:
This might seem like the most obvious one but you’ll be surprised to know it happens more often than not. You know your situation better than anyone else and you need to evaluate your budget to determine whether or not it’s the best choice for you down the road.
So here’s the bottom line, getting a car loan with bad credit can be challenging, but it’s not impossible. Make sure you thoroughly analyze the credit score as well as consider the options mentioned in this blog before you go running to shop for a car loan. Because what’s the point of having a car loan that just adds up more burden to your devastating financial situation.
We ensure your bad credit car loan situation is understandable and we help you in finding the perfect one that will work for your needs to keep your finances and credit on track.
Contact us at Car Payment Helper today to find out more!