Bad Credit Auto Loan Approval in 5 Easy Steps

Bad credit auto loans provide consumers with poor credit the ability to obtain funding to purchase a new or used car. While the interest rates for purchasers with bad credit is often higher, it is a fairly simple process to obtain loan approval and purchase the vehicle you want. Follow these 5 simple steps to quickly obtain your loan.

1. Save up Some Cash for a Down Payment

Because your credit score says that you are a higher lending risk, show the lender you are serious by having a down payment. This will communicate to the lender that you are willing to put some of your own money at risk and are serious about making the payments.

2. Shop Smart

Because you are already going to be paying higher interest rates, shopping for a used car instead of a new car, and shopping for a car that is reasonably priced instead of high end, can keep the lender willing to fund your bad credit auto loan. If the payment is too high, the lender will assume that you will not be able to carry the burden of the debt for the length of the loan. Choose a less expensive car and use the loan as an opportunity to rebuild your credit by making all the payments on time.

3. Compare Lenders

Don't be afraid to shop around. Auto lending is a competitive business and you may be able to negotiate a lower interest rate from a lender if you are not to eager to make the deal. Be patient, shop carefully, and carefully read the agreement before signing. The difference between even one percent interest rates can save you hundreds to thousands of dollars on the loan.

4. Repair Credit

Often, your credit isn't as bad as it appears, and even making small changes to your credit score can improve your chances of obtaining an auto loan. Review your credit report and make sure there are no errors on the report. Repair any errors you find; if there is an outstanding old debt that you can pay off and clear up, do it. The points you will save on future interest rates may be well worth paying off an old debt that is affecting your credit rating.

5. Be Honest

Be honest when you complete your loan application. Most likely, there is a loan product out there to meet your needs, but if you aren't honest about your situation, including your income and debt, your lender or broker may not be able to match you with the best bad credit auto loan product.

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