Can I Get Approved for a Car Loan with Bad Credit?

Having a bad credit score can affect your life in a number of ways. You may struggle to get credit, your interest rates may be higher than average, and you may also be flat out rejected for loans by financial and lending institutions. This can put undue pressure on your life which can be exasperated especially if you need a loan to get a car. There is good news. Even with a bad credit score, you can still get a loan for a car. We’re going to explore what you can do to better your credit situation and improve your odds of getting a good loan with reasonable interest rates. You can get a car loan even with bad credit, and get the car you desperately need.

Pre-Approval

Before you start the shopping process get pre-approved for credit. Pre-approval is going to give you a good idea about what you can and cannot afford when it comes time to buy a car. However, with a bad credit score, you may find it difficult to get pre-approved from a traditional lending institution. Don’t worry. If you are trying to buy a car with bad credit, go to the dealership for the pre-approval process. They have financial professionals on staff who work with people with bad credit every day. They have ties to the financial community in the area and have experience getting pre-approval for people with bad credit. The financial professionals at the dealership will help you secure a car loan that you can afford. Car buyers with bad credit should always look to the dealership’s financial team first because they are going to be able to get you the best possible loan in-house.

Budget

Another great reason for people with bad credit to go to the dealership for their financing is budget. Getting a loan for a car with bad credit is possible, but when you have bad credit, it is more important than ever to stay within budget. The finance professionals at the dealership will not only help you secure financing, but they will help you determine the most comfortable budget for your life so that you can make your payments on time. This can even help improve your credit score moving forward! Having a loan that you pay back on a schedule, as long as you are on time with it, will help improve your credit score. Getting help with budgeting for this loan from a finance professional is a good idea for people who have bad credit scores but still want to buy a car.

Put More Money Down

This may not be a viable option for everyone, but if you have bad credit, the more money you can put down initially on your car purchase the better your interest rates and loan terms will be. Saving up to put down a big down payment is a good idea for people who have bad credit. Not only because it will improve the terms of your loan considerably, but it will also afford you more options when it comes to what kind of car you can afford to buy. Understandably, it may not be possible for you to make a big down payment, especially if you have bad credit, but the more money you can initially pay the better your loan will be since lenders will be more confident in your ability to pay the remainder.

Avoid Further Bad Credit

If you know that you are going to be applying for a car loan, avoid further bad credit leading up to your application. This will ensure that your credit score doesn’t get any worse. If you are planning to apply for a car loan, don’t get new credit cards, pay rent late, declare bankruptcy, or have tax liens against you. All of those things can significantly decrease your chances of getting a car loan and seriously hurt your credit score. Leading up to your car loan application make sure you are paying all of your bills on time. This will ensure that you will be able to get a car loan and that your credit score will not suffer.

Think About A Cosigner

If you have someone in your life, who is willing to sign with you as a cosigner on your loan, you can seriously reduce the interest rates on your car loan. In the event that you cannot make your payments, your cosigner will be responsible for your debt so it is a lot to ask of somebody. However, if you can find someone to cosign for you, you can get more money at a lower interest rate. This is a great option for people with bad credit if they have someone willing to do this for them. Oftentimes a parent will sign for their kids who may be buying their first car. Younger people generally have poor or no credit just because they are unknown to lenders and haven’t yet had the time to build a credit history.

What Bad Credit Does to Your Loan

All a credit score is the lender’s confidence in your ability to pay your debts in a timely fashion. People who have bad credit scores are those that lenders have less confidence in as a result of missed, late or even non-payment of debts. Bad credit scores increase the interest rate on any loans secured. People with stellar credit scores of 740 or more will get the best interest rates on a loan, on a car this can sometimes even be 0 percent for people with outstanding credit. People with bad credit scores, on the other hand, scores under 580, can expect to pay 20 to even 30 percent interest on a car loan. At the end of the day having a bad credit score will probably not keep you from getting an automobile, which is great news! However, a bad credit score will increase the actual cost of what you are paying for the vehicle by a couple of thousand dollars compared to what someone with good credit will pay. It is important to try and improve your credit score so you can save money, but you still be able to get a car with bad credit.