Just because you have bad credit doesn’t mean that you can’t get an auto loan. Even if you have been declined for auto loans in the past, there are lenders that will work with you to give you a loan that is fair and acceptable for all parties. Lenders all have their own criteria to determine risk. While your credit might seem risky for some lenders, lenders with more risk tolerance will see you as a great potential customer and a future asset to their portfolio. The most important step to finding a loan with damaged credit is to shop around. Cheap Auto Loans can help you find the best rate from the best lender for your particular credit situation.
Shopping Around for a Bad Credit Auto Loan
Approach the auto loan process like shopping for any other major purchase. Even though your dealer might have their own in-house financing department, auto dealers are rarely the best sources for auto loans. Check the loan rates from your bank, your credit union, and then check auto lenders online. Online auto lenders have low expense rates, low overhead, and they are able to specialize in loans for very specific demographics of borrowers. According to one study by Bankrate, auto loans vary in interest rate by more than five percent between different lenders, and even more when you include sub-prime lenders such as “buy here pay here” dealerships.
Try Finding a Cosigner
If you have been declined for loans in the past, a cosigner might be just what you need to get a great auto loan. A cosigner is someone that tells the lender that they are vouching for your credit and character, and that they will take over payments of the loan if you are unable to continue. Try finding a cosigner with good credit, such as your parents or friends with long credit histories. Cosigning for someone’s loan is a statement of trust, so if you get a cosigner make sure to pay your loan as required by the lender.
Don’t get distracted by Monthly Payments
It is tempting to focus on monthly payments when you are looking for a bad credit auto loan. Since monthly payments are the most immediate concern for borrowers, it is common to be a little less attentive to the other terms of the loan. Even if the monthly payments are lower, other factors in the loan (such as interest rate and the length of the loan) will affect the total amount that you pay. As a general rule, if you have to accept an 84 month loan in order to afford a car… you can’t afford that car. Choose a car that you can pay off in 36 or 48 months, and don’t let lenders give you predatory interest rates just because of your credit blemishes.