A poor credit score doesn't mean you're stuck walking or relying on public transportation. Most people need reliable transportation, but having a bad credit score may stop you from applying for an auto loan. Because automobiles secure auto loans, there are ways to acquire financing without the best credit history. Explore your options and get the car loan you need.
Bad Credit Lenders
Some auto dealerships are less accommodating when borrowers have a poor credit score. Finding an auto dealer that specializes in or offers bad credit loans can help you get approved with poor credit. Contact larger dealerships and ask about loan products for people with bad credit, or go smaller and finance your car with a privately owned, yet reputable, dealership that offers in-house financing and bad credit auto loans. Do your research and check with your local Better Business Bureau to ensure the reputation of privately owned dealerships. Only choose dealerships that report regularly to the credit bureaus in order to help improve your credit score.
Check Your Bank for Financing
Shopping around and securing your own financing on the auto loan can help you get a better financing deal with poor credit. Dealers that offer financing to people with bad credit do charge higher interest rates on the vehicle loans. Check with your personal bank or credit union to compare loan terms and interest rates, suggests Warren Clarke, Automotive Content Editor for Edmunds.com.
Co-Signing
Financing a car with someone who has a good credit history can help get your foot in the door. Plus, finance companies use the median of both your credit scores to determine the interest rate on the auto loan. For example, if you have a 580 credit score, and your co-signer has an 810 credit score, the median credit score is 695, which can help you qualify for more favorable rates on the auto loan.
Down Payments
Consider taking money from your personal savings account to put a down payment on the car. Putting a down payment on the vehicle helps you qualify for a loan with poor credit, and lenders may reduce your interest rate, according to CarsDirect. Because down payments aren't required to buy a car, there's usually no minimum requirement. However, the higher your down payment, the better. Financial Web recommends down payments between 20 and 25 percent of the sale price.
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