A bad credit report can make it difficult to get the right a car loan for you and lenders always know about an individual’s past credit record so it helps to have a high credit score but having a high credit score is not necessary for you to get a car loan with low rates you can afford.
Your risk for an auto loan is generated by credit bureaus using credit history files they have access to that they collect from creditors. Lenders use credit reports and other relevant details to determine whether the loan applicant’s credit score qualifies him or her for the loan.
Locate a Lender Who Specializes in Subprime Auto Loans
The first step towards securing an auto loan if you have bad credit is to carry out a background check on your lender. This will help you determine whether they offer loans to individuals with poor credit history. Most auto dealers prefer providing auto loans for new vehicles and can provide you with incentives such as low-interest rates to encourage you to purchase new cars. If your dealership is hesitant to finance your auto loan because of your poor credit history, you should consider lenders that provide subprime auto loans.
Determining FICO And Credit Scores
In discussing facts about getting a car loan with bad credit, the next step is to figure out current FICO (Fair Isaac Corporation) scores. Scores 650 and over are considered good scores, while scores below this are rated as fair or poor. The better rating received the lower interest rates are paid and the easier it is to qualify for a loan. Lower scores don’t disqualify anyone from financing. These scores simply mean that interest rates will be higher through lenders specializing in sub-prime loans.
FICO Scores Are Based On A Number Of Considerations
Considered in FICO scores are the number of outstanding debts, total amount of debts compared to income, length of debt, credit cards vs installment loans, payment history and number of recent inquiries by lenders to your credit report. Having no installment loans and only maintaining credit cards will lower a score. Paying debt on time increases scores. Request a copy of credit reports to determine your scores and standings. The reports will also give information on what effects and how to improve FICO scores. Any debtors denied credit are automatically entitled to request a free copy of their report. In addition, everyone is entitled to receive a free copy of their credit report annually from each of the three major credit bureaus. Simply go to FreeCreditReports.com to find out more facts about getting a car loan with bad credit and how you may improve your chances.
Determining Affordable Payments
When purchasing a new vehicle it is important to determine affordability. Trying to purchase a vehicle that is beyond the borrower’s ability to make timely monthly payments is a recipe for disaster. Lenders consider that 20% of the total take-home pay each month is the most that should be used for vehicle payments. The monthly payment will be the amount determined by the loan amount, interest rate and full term of the loan. Be sure to include any cash or car trade-in value for a down payment as part of your calculation for your monthly payment. Divide monthly income by 2 to determine disposable income. Disposable income is the portion after normal expenses available for other purposes. Deduct other debt from this amount to determine how much can be available from disposable income for auto loan payments
Finding A Lender Through A Dealership
Finding a lender to provide financing for a vehicle is the next step in the process of using the facts about getting a car loan with bad credit that has been discussed. There are a number of options available for financing. This should be determined by a combination of your credit score and affordable payment amount. Consider these carefully. One of the first questions asked by a salesman at a car dealership, new or used, is how much of a monthly payment the buyer is seeking to pay. It is suggested you start low. Other questions include down payment amounts or vehicle trade-in options, At this point, you may ask, is it possible to later trade in my car later on?
At New Car Dealerships
Individuals with less than perfect credit and lower monthly disposable income can often start at a new car dealership. Sometimes they are able to work with all credit ranges, including fair or even poor FICO scores. If you have a trade-in or cash down payment your chances of financing increase. The next stop is the used car dealership. It is suggested to find a reputable dealer first. Many of these dealerships are available. Your chances a finding one to work with poor credit scores are good. Some offer in-house financing while others strictly use sub-prime lenders with interest rates up to 30% at times. Check over contracts, rates, payments, penalties, and warranties carefully. You may ask is it possible to later trade in my car later on. Usually, the answer is no, unless the sales lot offers their own arrangements.
Take the Initiative to Know Your Credit Score
The first step towards seeking a title loan with a poor credit history is by knowing your credit score. You should also remember that despite the popular misconception on credit scores, there is no set minimum score for one to qualify for a title loan. The qualifications vary from one lender to another and a number of finances involved. You need to know that banks and major dealerships may be reluctant to do business with people whose credit score is bad compared to online leaders. A credit score is a number assigned to a borrower depending on his or her credit reports, and it shows lenders the capability of an individual to repay a loan. A credit score determines whether a lender will offer you a loan after you apply for it. It is important to note that although you may have a poor credit history, you can take some steps to ensure that you access auto loans that will be affordable. It is important to know the effects of your credit score on the financial decisions that you are about to make especially taking an auto loan. Knowing your score will be helpful as you seek loan options that will be favorable to you.
You can Access Rapid Auto Loans if You Get the Right Lender
Auto loans can be rapid even when you have a bad credit record. To ensure rapid auto loans, you need to find a lender who specializes in subprime auto loans. Be careful not to fall for subprime lenders who will provide you with instant approvals as they usually have hidden aspects that seek to exploit you. You should check the lender’s reputation by going through its previous customers’ reviews before making the final decision.
Shop for Auto Loans that are Flexible Regardless of Credit Status
Having a poor credit history does not mean accepting all the options thrown your way. You should review the options provided by banks, dealerships, and other online lenders to get the best deal. You should not appear desperate to lenders as they will take advantage of your state and exploit you. Your poor credit history should not deny you a chance to apply for a title loan. With a focused review of the available options, you should settle for a provider who gives you the best deal even with a poor credit history.
Consider ‘Buy Here, Pay Here’ Lots
Hidden between large new car lending firms are small and individually owned car lots that offer auto loans even to people with poor credit reports. The firms are willing to finance your title loan immediately right at the lot. Although most of these ‘Buy Here, Pay Here’ offer good deals, some of them might have hidden motives that may seek to exploit you. In-house tenders might exploit you and you will need to be careful when picking on them. You should consider factors such as their interest rates and down payments.
Prearranging Financing Before Shopping For A Vehicle
Many lenders offer loans by simply submitting an application online. A simple search engine scan will lead to many options. Having an existing relationship with a bank or other financial institution can be a great benefit. Special car financing opportunities are often offered by local or major banks. Try to take advantage of these services. Having been with a bank for a long period can work to a borrowers’ benefit. Membership at a Credit Union may be a great bet if a traditional bank is not willing to offer a loan for a vehicle. Loan officers at Credit Unions actually sit with borrowers to look beyond FICO scores. Rates are often lower. Approvals are often much easier.
Keep In Mind
There are a few things to remember when obtaining a vehicle loan. First, remember that the vehicle is being presented as collateral. There is less risk for the lender because of this and it will work to your advantage. The more of a down payment you are able to offer on a vehicle purchase the greater probability of financing. If you do end up paying a higher interest rate for a vehicle at your initial purchase there are still options for the future. After a year it is fairly easy to refinance the vehicle at a much lower rate. The year of on-time payments will add to your credibility. Or you may ask is it possible to later trade in my car later on for a different vehicle.