Are you in the market for a new or used car? Do you have bad credit, which has you worried about your ability to obtain a loan?
If you answered yes to both questions, it’s time to learn more about auto financing for consumers with bad credit. Even though there are some hurdles to clear, you’re not out of luck. There are steps you can take to secure a loan, thus driving off the lot with a big smile on your face.
Here are five tips for finding an auto loan with bad credit:
1. Ask the Dealer for Help
When buying from a dealer, its finance department can assist you with obtaining a loan. While you don’t want to rely solely on this means of securing a loan, it’s a good place to start.
After checking your credit history, they can match you with lenders who are able to provide a loan with competitive terms.
2. Shop on Your Own
It never hurts to let the dealer’s finance department take the lead. But while they’re doing that, shop around on your own.
You can search online for a loan. You can contact your local bank for more information. You can ask your friends and family for a referral.
Don’t put all your trust in your dealer, as they don’t always have access to the best deals.
3. Be Okay with a Higher than Average Interest Rate
In short, this is something that typically comes with bad credit. Since you’re considered a higher risk borrower, the lender protects itself by charging a higher rate of interest.
Tip: compare a minimum of three to five lenders to ensure that you have a clear idea of the type of interest rate you qualify for.
4. Put More Money Down
Not only does this improve the likelihood of an approval, but it can also help you secure a lower rate. Not to mention the fact that it results in a lower monthly payment. It’s a win across the board.
Even if you only have $500 or $1,000 to put down, it’s well worth it.
5. Wait to Buy
If you’re finding it difficult to obtain a bad credit auto loan, take some time off from your search if you can afford to do so.
During this time, take steps to increase your credit score. By boosting your score by a few points, you may find it easier to secure a loan with a competitive rate.
Even though bad credit makes it more difficult to secure an auto loan, it’s not impossible.
By using the five tips above, you put yourself in position to obtain a loan that satisfies you. And when that happens, you won’t have any regrets.