Bad Credit Auto Loan Financing: 3 Things to Remember

Plenty of people in need of a car have bad credit, so there is an entire industry dedicated to offering bad credit auto loan financing. However, many of the lenders offering these services may also attach hidden fees and take advantage of consumers with high introductory rates. If you hope to get bad credit auto loan financing without getting yourself into more financial trouble, keep the following three things in mind as you seek financing for your auto purchase.

Improve Your Credit

Bad credit is not something that has to stay with you for the rest of your life. If you have time before getting an auto loan to improve your credit, like paying off other bills, then be patient and work on your credit score. This is the best way to save money on your auto loan financing because a better score will help you receive a lower interest rate. Be diligent in getting your debt down, paying all of your bills on time, and using your credit wisely for small purchases. Lenders want to see that you can be trusted to pay back the loan as well as your stability with your finances overall. By increasing your score, you will have more of an advantage when it comes to the negotiation process with the lenders.

Check Your Credit Report

Make sure you know exactly what is on your credit report before seeing a dealer or lender. You should clear up any mistakes on your report and ask questions if something does not look right or seems out of place. Should you have a mistake and clear it off your report, your score will increase. In general, being knowledgeable of your credit score and history will help you determine whether you should start seeking lenders or put your search on hold until you can improve your score.

Shop Around

It is unlikely the car dealer you are buying from will give you the best loan rate. In addition to the dealer that you have in mind, also seek out banks and credit unions in order to compare loan rates. By having several offers, rates, and terms of the loan in hand, you'll be more at an advantage when you decide on the institution that best suits you. If you decide to go with a dealership as your lender, then make sure to finalize the price of the car before you ever begin to discuss the financing for your purchase. Otherwise, you may not notice the price of the car going up while the dealer brings the APR on the loan down. Watch out for hidden fees such as processing charges or early repayment penalties and make sure that the APR is fixed. If it is not, then make sure you understand how, when, and by how much the interest rate you are being offered will increase.

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