How To Get A Car Loan With Bad Credit?
If you want to buy a car but your budget is not sufficient, applying for a car loan can be a good option. What if you have a bad credit score? No worries, you still have a chance: bad credit car loans.
How To Get a Bad Credit Car Loan?
Generally, there are two major factors that lenders consider: The strength of the borrower (if you will be able and willing to pay back the loan) The loan exposure (sale price of the car + other financed expenses – down payment cash – trade-in value = loan amount).
So, you should start by fixing your damaged credit history by paying off your former monthly payments. The cleaner your credit history seems, the more chance you get to convince the borrower. Then, you should minimize the loan amount compared to the value of the car by increasing the value of your trade-in and the amount of your down payment.
Steps To Follow While Applying For a Car Loans With No Credit Check
Firstly, you have to know your credit score, the factors behind your credit score and yearly interest rates, then, you will be ready to start your research.
The next process will be the most enjoyable and tiring part: shopping. Visiting around different lenders and searching for various terms may lead you to find the most suitable offer for you. By the way; if you have a good relationship with your bank, even if you do not pre-qualify for a car loan with a bad credit score, you may still have more chance. Also, as the other option, you can consider applying credit unions for a loan since they are non-profit organizations owned by their members and are more open to lending. Lastly, bringing a co-signer with you may help you to reduce the interest rate.
What Should You Be Careful Of During The Process
- If you do not want to face high-interest rates, you should know your credit history well and figure out your budget
- To raise the chance to make a deal, you can try shopping at the end of the month or during off-hours.
- You should avoid unnecessary upgrades such as seat warmers, sunroof, etc., by having a strict no-upgrade policy and a maximum purchase price in mind.
- If you do not want to face higher monthly payments, you should make sure that you have read all the details about your loan alliance and be sure the terms are final before you sign.
- Avoid subprime lenders since which can damage your credit score with their high interest rates.
- Be aware of the fact that lower monthly payments may lead you to pay more than the value of your car over the life of the loan.