3 Tips for Getting Approved for a Bad Credit Car Loan

Bad credit car loans are not easy to find at traditional lenders. Most will be concerned your previous credit history is a strong indicator you will default on the loan. Even though car loans are secured against the asset itself, the car, they are still risky because cars lose value so quickly. You will need to find a lender willing to take the risk, and even then you should be prepared for some challenges.

#1 File a Credit Explanation

You should know your credit before going into any loan negotiation. You may find your credit took a recent hit, and this is not the right time to look for a new loan. Typically, any late payment should be at least 2 years expired before you apply. When you review your credit, take note of the major errors that are dropping your score. Often, just one problem is the source for the bad credit score. For example, you may have had a late utility bill after moving to a new residence. In this case, you can file a statement with the credit bureau that will be part of your credit report in the future. This statement can explain why you missed the payment, such a recent move or change of address.

#2 A Part Time Job

The high cost of high risk loans is usually due to interest rates. You will find APR is typically over 10% if you are a very high risk borrower. One way to reduce the expense of paying so much in interest fees is agreeing to a higher monthly payment. The more you can pay each month, the shorter the loan and the lower the interest rate. Both of these factors will reduce the total cost to finance the loan. You may know you cannot afford the high monthly payments on your current salary. Even earning a few hundred dollars a month extra, however, can greatly increase your ability to make high monthly payments. Seeking a part-time job on evenings or weekends can put that money in your pocket. You do not need to find a high wage position. Even assisting at your community center or church, babysitting or mowing lawns in your neighborhood can put you over the edge.

#3 Save for a Large Down Payment

A large down payment can go a long way to getting a lender to agree to financing your vehicle purchase. The down payment means they will have to borrow less from other banks and lenders to finance your loan. It also means they have an immediate influx of cash in return for providing you with the vehicle financing. If you plan on getting a part time job, take this step 6 months or more before applying for the loan. Save any extra funds you earn. You may find you cannot work two jobs, and in this case you will need to get very frugal in order to save the extra money. The number one place most people learn they can cut back is dinners and evenings out.

Need an Auto Loan? Get a Free Quote Here!