5 Car Loan Tips for the Credit-Impaired

If you have bad credit, you can use a few car loan tips to help ensure a loan approval. Having less-than-perfect credit doesn't mean you can't get a car loan. It is a good idea to take some time, do some research and make sure you get a good deal on a car loan.

1. Boost Your Credit

A few simple changes applied over a few months can increase your credit score. You should plan ahead and start working on your score before you are even ready to purchase your new car. This can save you a lot of money over the course of the loan. First, pull your credit report and check for errors. Then look for any negative information that can be improved. This includes high credit card balances, late payments and not enough credit history. If you need to improve your score and have little credit history, try opening a secured credit card. Anyone can qualify for one, and having one and paying on time for six months will make a big difference in your score. Also, anytime your credit card balances are over 30 percent of their limit, your score will drop, so pay them down.

2. Get a Cosigner

When you have less-than-perfect credit, a cosigner can really help. A cosigner may make a loan possible when you otherwise would have been rejected. Also, a cosigner can help you get a better interest rate and thus cost you less money over the life of the loan. A cosigner could be a friend or relative. It doesn't matter to the lender, but remember that when a cosigner signs on your loan, her credit is at risk if you do not pay on time.

3. Join a Credit Union

A credit union can be a great place to get a car loan, and if you are a member, the credit union may approve you even with less-than-perfect credit. Credit unions have great interest rates too. There are credit unions open to virtually anyone. Your local municipality, county or state will have one. They usually accept anyone who lives, works or studies in their area. Also family members of credit union members are eligible. Many colleges offer student credit unions too.

4. Save for a Down Payment

When you are applying for a loan, the lender wants to see two things:credit and down payment. If your credit isn't up to par, having a large down payment will make up for it. So if you can't improve your credit enough to make a difference in your car loan, definitely save a nice down payment to make sure you get approved for the loan and at a good rate. For most lenders, 30 percent down should be enough.

5. Keep Your Job

Employment history is important if your credit isn't great. If you are planning on finding a new job, wait until you have purchased your car. Showing responsibility and stability will help in a loan approval. Many lenders like to see at least two years in the same job.


Need an Auto Loan? Get a Free Quote Here!