Bad Credit? A Used Car Loan Is Still Within Reach

Having bad credit doesn't mean a used car loan is out of reach. It won't be as simple as if you had good credit, and it might be a bit more expensive, but there are still many options open to you.

You're Turned Down for a Used Car Loan. Now What?

If a bad credit score causes a lender to turn you down for a used car loan, prepare to look for another lender, but follow these steps first.

  • Check Your Credit Report - You need to know what the lender saw that classified you as a sub-prime borrower. Make sure the report is accurate, and if it is inaccurate, contact the credit reporting agency to correct it.

  • Create The Best Report You Can - Your credit score changes regularly as you become current on credit payments. If you are on the verge of an improved score, wait before approaching another lender.

  • Document Improved Circumstances - Approaching a second lender with documentation that explains how you are in a better position to borrow now will improve your chances. Perhaps your income has increased, or you have paid a loan off.
Getting Your Best Deal

Don't be discouraged if you have bad credit and still need a used car loan. There are many lenders who specialize in sub-prime borrowers or borrowers with bad credit.

However, these lenders charge either a higher interest rate or expect a larger down payment, or both. Keep three things in mind as you seek a lender for a used car loan when you have a bad credit history.

  • Relationships Pay Off - In this mobile society, it is more important than ever to develop relationships with your bank or credit union. Often, lenders have leeway to adjust the terms of a loan even when the borrower has bad credit.

  • Dealers Have Deals - Don't overlook the used car dealer who has the car you want. They already have the relationships mentioned above. Many dealers specialize in getting loans for those with bad credit. Again, you will most likely pay a higher interest rate on these loans, but everything is negotiable. The tips for preparing to talk to a lender above are just as important when working with a dealer to secure a used car loan even though you have bad credit.

  • Getting Help - If you have a friend or relative with good credit and they are willing to co-sign a note for you, that can overcome your credit history. Your combined scores may allow a lender to offer you a used car loan, even though you have bad credit, at a competitive interest rate with a co-signer.

Borrower Beware

Remember that when you have bad credit and need a used car loan, you are in a prime position for someone to attempt to take advantage of you. No vehicle is worth paying too much for. Knowledge is your best defense against this, and in the Internet age there is no reason not to be knowledgeable.

Be sure you know the competitive price for the used car you want. Know the current used car loan interest rate and the current rates for sub-prime borrowers. Finally, be wary of too-good-to-be true deals. In all likelihood, they are exactly that, too good to be true.

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