The Ins and Outs of Getting a Bad Credit Car Loan

Trying to find bad credit auto loans is easy, simply look for the nearest bad credit auto lender, walk in, let them set everything up, sign some paperwork and drive away in a car. But getting a good bad credit auto loan takes a little more effort than that, so it is important that you know the ins and outs of getting a bad credit auto loan.

Getting Your Credit Report

It all starts with your credit report and you need to get it, the earlier the better. There are three main credit reporting agencies: Experian, Equinox, and TransUnion that are all required by Federal law to provide each person with one free credit report per year, and you can get three copies of it if you need it.

After you get your credit report, the first thing you should do is buy your credit score and find out where you land on the scale. Even though getting your actual score generally costs money, it is worthwhile so you can find out what your score is, because there are different categories that your credit score will fall into. A subprime credit score is typically averaged around 619, and this is around the score you will need too apply for a bad credit auto loan, since applying for a loan with a good credit score might actually get you a worse deal.

Review and Repair

After you get your credit report, it is time to identify any erroneous charges that may have been applied and take care of them, if that is a possibility. Along with taking care of erroneous charges, a lot of credit experts agree that you should try to also pay-off any outstanding charges and start improving your financial habits. Doing this will help give you an even better chance of getting a car loan, because if you are able to take care of these charges and make payments on time it will show that you have a measure of responsibility when it comes to making payments.

Getting Prepared: What to Bring With You

Now that you have resolved (or attempted to) any black marks on your credit report, you can prepare the materials that you will need to bring with you. Since you have bad credit, you might not get an auto loan (unless it is from a shady auto dealer) without showing some responsible financial habits. When you go to a lender to talk about financing, bring some type of proof that shows you are taking steps to improve your financial responsibility. Bring things like a recent pay stub from your job, your driver license, personal references, and a utility bill. All of these should aid your cause because they show that you are making steps to improve your financial habits, the job and drivers license showing that you can make money to improve your financial habits, and that you care enough to do so. All of this shows the lender that you have no intentions of missing payments, ultimately giving them peace of mind when approving you.

Pre-Approval

Now it is time to get pre-approved and start looking for a dealer, but you need to understand that you will be paying a higher interest rate than someone with good credit who wants to take a loan out on a car. Many dealerships offer online applications that you can fill out online to get pre-approved, and there is no such thing as filling out too many, lenders understand that you are looking for the best interest rate. Explore your options, don’t just apply, get approved, and then go take out a loan with the first lender you find. Take your time and find the one that offers the best rate, and do some research or ask around too make sure they are a credible lender.

Finding a Bad Credit Auto Lender

Your bank knows your financial habits better than anyone, even if you don’t think you will get approved go try and take out a loan with the bank anyway, they may be more willing to approve you than you think.

Dealerships

There are plenty of credible used and new dealerships out there that offer bad credit auto loans to customers, you just need to hunt around a little bit. Start with looking around online and paying attention to various advertisements you see or hear for dealerships that say things like “your job is your credit!” or “Bad Credit? No Problem!” These are all good places to begin filling out pre-approval forms if they have them, or going to discuss the options they have to offer.

Used or New?

Don’t forget about your used lots either, if they don’t have a website or pre-approval application bring your paperwork and go talk to someone at the dealership. While you might have an extremely high interest rate on a used car that could eventually add up to the full-sum of the original loan, it is a good option if you don’t mind making some of your own repairs if the car ends up needing them, or if you need a car as fast as possible to get you back on your feet.

The new dealerships will have a bigger loan with a high interest rate as well, but the loans will not add up to equal the value of the new car. While it may not be as easy for you to get into a newer car, if you want something reliable that you plan on having for a much longer period of time then this is the way to go.

No matter what type of lender you choose, avoid the urge to trade-up (if that is an option) until you have fully paid off the original loan. While a trade-up offer may be extended, you will end up paying off an even bigger loan if you trade up before the original loan has been paid off. Also, shop within your price range and avoid a car that has any unnecessary additions. Just because you can get a $20,000 car with heated seats and a nice sunroof doesn’t mean you should; go for the $14,000 car that will give you smaller monthly payments and will allow you to get that loan paid off faster.

There You Have It!

And there you have it! With a little research and hard-work, you will be well on your way to cruising down the road in a car, even with bad credit. Just do your research, show the lender that you are responsible and serious about paying off the loan, and don’t settle for a deal that makes you uncomfortable, and you will be fine.