How to get Bad Credit Auto Loans
Useful tips and pre-purchase advice
Bad credit auto loans are easy enough to find if you do your homework and shop around, the hard part is finding one with decent interest rates. Your credit score is affected by more than just late payments; there are up to 100 other variables making up a credit score. One such variable is how many accounts you have. Having a lot of open accounts tends to be seen as a risk by most creditors.
How bad your credit score is will determine how high the interest rates will be if you get approved for a loan. That means the lower you score the higher the interest rates which can range from 10 to 20 percent, sometimes even more.
Actually finding a lender willing to offer bad credit loans isn’t as difficult as it once was. Car dealerships are usually quite happy to oblige because they get a cut of all finance deals they offer. Dealers will normally offer finance from a manufacturers company as well as from banks and credit unions but beware, the interest rates are often much higher than if you applied for the bad credit loan yourself.
Before you buy a car:
• Get a copy of your credit report and check the information to make sure it is correct and accurate. It also prevents you from being presented with any nasty surprises later. Knowing what your credit score is can help you to narrow your search for a car because you will have a better idea of how large a loan you are likely to be eligible for.
• Always go to your bank or credit union when looking for bad credit auto loans because they don’t tend to turn people down, particularly if you have an account with them.
• Credit unions usually offer more flexible loan prices which means you stand a better chance of being approved for a bad credit loan.
• Don’t apply for any bad credit loans until you’ve at least started improving your credit score by paying off credit cards, loans, debts and closed unused store accounts.
• Don’t apply if you’ve moved in the last 6 months and college graduates shouldn’t apply until they’ve held down a job for at least 6 months.
• It’s a good idea to apply for bad credit loans face to face because it speeds the process up by allowing you to discuss details (including the reasons for your bad credit) that do not come across on application forms.
• Avoid ‘spot delivery’ when dealers encourage you to drive your new car home while he concludes the financing. This is a bad idea because you could end up paying more on interest rates, large down payment or both.