7 Ways to Get Approved with Bad Credit Car Loans
Shopping for automobiles is exciting, right until you talk about auto financing. During the wake of the worse financial discrepancies through the years, a massive number of customers find themselves unable to acquire traditional financing options for this type of purchase due to poor credit.
This type of problem can happen to anyone; whether you have a low credit rating due to bad spending habits, impulsive buying or you suddenly lose your regular job, bankruptcy, accident, severe illness, or any emergencies that may shatter anyone’s financial stability.
For the car buyer with bad credit car loans, applying for an auto financing loan can be complicated and stressful.
On a lighter note, there are actually ways on how to get your loans approved despite the negative credit reports.
Having said that, read on to know the ways on how to get approved with bad credit car loans (and what financing options work best for you):
Know your FICO score
A FICO score (Fair Isaac Corporation Score) refers to an individual’s credit score where financial institutions determine a client’s credit risk, this score is computed by a software called Fair Isaac which came from the main credit bureaus namely Equifax, Experian, and TransUnion.
The FICO score is based on the data that the credit bureaus keep on the financial files about you.
Determine why you badly want/need to buy a Car
What type of car buyer are you? Are you a person who is in need of a comfy mode of transportation? Or do you just want to buy a car just for luxury? Given the following intentions, we highly recommend you to loan a car with bad credit if it is for emergency purposes; a car must always serve as a necessity and never a luxury.
Before you begin to shop for a car, determine how badly you need to buy a car. Aside from that, get your credit checked and rethink of options such as using your current vehicle (if any), use public transportation for the meantime, or carpooling services while improving your credit rating; for car buyers who just wanted to loan a car for the sake of luxury, then we suggest you get credit cards then spend it for at least half a year (or for one year) and then get the deposit back once you decide to close an account.
Check your Credit Reports
Get your credit checked first before applying for an auto financing loan. Take a look at your credit history and what your current FICO score is; determine what activity resulted to a bad score such that of late monthly payments, delayed time payments, or if there are any malicious activities on your credit reports.
Having said that, you can access or request to get a certified true copy of your credit reports for free every year.
You must bring your reports when you visit financial institutions to see if it affects your interest rate; some money lenders and car dealers are willing to assist you with your FICO score.
Compare the Current Rates of various Financial Institutions
Keep in mind that having a bad credit does not serve as a hindrance to getting your loan approved. Aside from that, do not perceive that a bad credit means it is a negative factor when applying for auto financing loan.
Provided that, financial institutions offer different rates. We highly recommend you to take a look at their auto financing loan rate sheet.
This is so that you know the current rates of brand new and second-hand cars based on your score; bring this information with you when you approach lenders and dealers.
Do some in-depth research by finding out and comparing the current rates of money lenders until you get the price that suits your financial situation. Generally speaking, we highly recommend you to go to an established bank and auto financing lending companies rather than approaching car dealers across the street offering a “buy me” and “pay here” kind of deal.
If you do encounter an auto financing loan with a high interest rate, work on reviving your FICO score so that you can increase your chance to refinance in the future.
In addition to that, national and international banks can also help people to get their loans approved despite the bad credit.
Opt for a Shorter Life of the Loan
You might get lower monthly payments with a ten- year length versus a five-year length for the life of the loan, however, you have to consider the interest rate and the total loan amount.
Having said that, a life of the loan refers to the duration of a loan term (i.e. 5 years, 10 years to pay, etc.) and how long it
will be tracked.
Usually, long-term auto loans have higher interest rates and annual percentage rates; therefore you have to opt for a shorter auto loan term to pay for a lower loan amount.
Plus you will only deal with a few years where you won’t need to make monthly payments, this gives you more time to pay for other loans to improve
your FICO score.
Opt for Brand New Vehicles Instead of the Used Ones
Even though a used vehicle will cost less, these actually come with higher interest rates than the brand new ones. Therefore, buying a brand new vehicle with a bad credit car loan is actually a good option.
We highly recommend you to buy a brand new car using your auto finance loan;
these are the ones that tend to offer a better financing.
Get a Cosigner
Depending on your financial and credit situation, it is always the best option for individuals with a bad credit car loan to get a cosigner.
With this, there are high chances to get a loan with a competitive interest rate and loan amount.
Whether an individual has no credit history or have a track record of financial discrepancies, having a bad credit and a poor FICO score will make it complicated to get an auto financing loan approved.
Nevertheless, financial institutions offer good auto loans to clients with a bad credit car loan. With that being said, this will serve as your ultimate guide as you process your loan and get that car that you have been eyeing for.
In essence, it is still best to not have a bad credit car loan at all, you must always consider your financial stability before giving in to your wants and buying the things that your financial and credit situation cannot handle.