Advice for Borrowers with Bad Credit Looking for an Auto Loan

Borrowers with bad credit who are looking for an auto loan do not have to worry. There are plenty of loan products available on the market to help you get the car of your dreams. While your bad credit might mean a higher interest rate, it does not necessarily mean that you cannot have the car you desire. There are things you can do to ensure you obtain the best possible loan.

Shop for Cars First

Being realistic now can save you money later. While your dream car might be that $40,000 Alpha Romeo, if you have bad credit, you will find much better lending options if you choose that low-mileage used Toyota Corolla instead. Do your car shopping ahead of time and determine how much you will need to borrow. Do not be pressured into making a deal on the spot; take the time to decide the best car - and the best lending approach - for you.

Check Your Credit Score

Before you begin shopping for an auto loan, take a look at your credit report. You can obtain it online from the three major credit reporting agencies: Experian, TransUnion, and Equifax. These reporting agencies are required by law to provide you with a free copy of your credit report once a year, upon your request. Review the report for any errors, and using the online form available at each agency's website to report any changes. You can also dispute errors if there is something on your report that belongs to someone else or does not sound right.

Shop Lenders

Do not limit yourself simply to your own bank or the dealership's lender. In fact, you can do your auto loan work ahead of time by connecting with a loan broker online. Find a lender who specializes in bad credit auto loans in order to have access to the best possible loan choices.

By completing one application with a loan broker, he or she can access multiple loan products that meet your needs based on the amount of money you need, how much down payment you can afford, and what your credit rating is. Compare offers based on annual percentage rate (APR) to make sure you are getting the best deal. Be cautious when choosing a broker and choose someone reputable since you will be required to provide personal information like your social security number.

Make a Down Payment

Borrowers with bad credit can significantly increase the odds of being approved for a car loan simply by agreeing to make a down payment. Even if the down payment is only a few hundred dollars, it reflects serious commitment on the part of the borrower, reducing the perceived risk of the lender.

Don't Lose Hope

Even if you end up with a loan at a high interest rate, remember that as you improve your credit rating, you can always refinance the loan at a lower rate and save money over the course of the loan. To minimize the cost, be sure to make all of your loan payments on time and talk to your lender about structuring the loan with automatic interest rate deductions for every year of on-time payments.

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