Even though getting a car loan with poor credit is slightly complicated, it is definitely possible. In fact, there are many lenders who offer bad credit car loans on varying terms and conditions.
So, if your question is how to get auto loans for bad credit, then you have landed on the right page. In this article, we have mentioned all the critical facts which you must know about bad credit car finance. Along with it, we have also cited 5 amazing ways that can help you easily purchase your dream vehicle even with bad credit history.
How To Get Bad Credit Car Loans? 5 Easy Ways
A credit score of below 580 is considered bad credit. Hence, most auto loan lenders prefer to provide loans for people who have a credit score of at least 661. Nevertheless, you can still get auto loans for bad credit. The only thing is that the interest rates will be significantly higher.
So, if you are buying a car with bad credit, then here are 5 steps you must follow to make the process easier.
1. Improve Your Credit Score
Even though it might seem hard to instantly improve your credit score, here are some ways in which you can do it:
- Before applying for auto loans for bad credit, settle down all your pending bills and monthly payments. It is important because 35 percent of your total credit score depends on this payment history.
- Review and resolve all kinds of credit reports. This can include errors in which even after paying your credit card bills on time they were reported as unpaid.
- Getting a higher credit limit will boost your credit utilization which makes it easier to apply for bad credit car finance.
2. Keep Your Savings Ready To Make A Large Down Payment
Most car experts recommend paying at least a 20% down payment of the price of the car which you wish to purchase. That is why it is good to save your money and pay a down payment as high as you can to reduce your monthly loan payment significantly.
3. Purchase A Less Expensive Car
Since you are already having financial crises and bad credit, the wisest step that you can take is to buy an inexpensive and reliable car according to your needs. The lower the price of the car that you wish to purchase, the higher will be the chances of getting your loan approved.
4. Research And Compare Different Car Loans
Since most dealerships charge an additional commission and are likely to provide you with a higher interest rate, you can shop around for yourself and compare all the available car loans in order to find out the best one for yourself.
5. Get A Co-Signer
A co-signer can be your friend, a family member, or a relative who has a better credit score than you. Having a co-signer involved in your car loan will help you to get auto loans for bad credit comparatively at a much lower rate.
Conclusion
During these times of never-ending needs and many added expenses that consume a large part of your income and savings, falling into an economic hardship is not new.
In this situation, buying a car with bad credit seems to be an impossible and unachievable task. But you can use the above methods to improve and increase your chances of getting your car loan approved even after having a bad credit score.
FAQs
Q1. Can I purchase a car with a credit score of 500?
Ans. Yes, you can purchase a car even after having a credit score of 500. However, the interest rate would be 13.97% for buying a new car and 20.67% for used ones.
Q2. Which lenders can I consider for getting bad credit car loans?
Ans. Some lenders that can help you include credit unions, banks, online lenders, and ‘Buy here and pay here’ type of dealers.
Q3. Is it possible to get a loan for purchasing a luxury car with a bad credit score?
Ans. No, most bad credit car loans will not be able to provide you with a sufficient amount to purchase your dream SUV or a high-end luxury car.
Q4. How much credit score should I have to get a loan approved without a co-signer?
Ans. You must have a credit score of at least 585 or higher than that.
