Tips for Getting an Auto Loan with Bad Credit

If you are planning to obtain an auto loan with bad credit, you must first be aware of a few essentials. First and foremost check your credit report and confirm that all the details that place you in a bad credit category are accurate. If not, get your credit report corrected. There are many potential customers who have a bad credit history and there is a dedicated financial sector that provides loans.

Getting an Auto Loan with Bad Credit

Here are a few tips below to help you analyze bad credit auto loans, with bad credit:

  • Realize that with a bad credit history, your auto loan is going to be more expensive. You will have a higher down payment and a greater rate of interest.
  • Do not opt for a loan that you cannot service. This will damage your credit history further. If you repay your loan properly, you can improve your credit rating in two to three years.
  • Approach a lender directly. Do not expect the dealer to negotiate a good deal for you. The dealer gets a cut of the loan amount it is in their interest to inflate the interest rate. A lender, on the other hand, will be more reasonable in the rate of interest charged.
  • Once you have a pre-approved auto loan, approach a dealer for a car within the loan amount.
  • Do not be led to purchase a car that is more expensive than what you can conveniently afford.
  • Before approving the car loan, the lender will ask you for proof of employment. So have all the necessary papers that show your income. The most common documents are paystubs, W2s and tax returns.
  • It also helps if you have been employed with the same employer for at least a year and reside at the same place for a year or more. If you meet these criteria, highlight these points to the lender.
  • If you have a checking account or savings account with a local bank, approach them first for a loan. They are more likely to offer you better terms.
  • If you belong to a credit union, you can also consider approaching them for a loan. Credit unions typically have lower rates and fees than big banks.
  • Shop around for a good deal. Do not accept the first loan you come across just because you have a bad credit history.
  • Negotiate for a lower interest rate by increasing your down payment and convincing the lender that you are sincere about mending your credit history.
  • After some time of prompt repayment, your credit history will be improved. Approach your lender and ask them to refinance the loan by reducing the interest rate. They will oblige you in order to retain your custom.

It is not impossible to get an auto loan with a bad credit report. However, you will have to work harder to get yourself a good deal in terms of lower down payment and lower interest rates. One thing that you should remember is to have a budget in mind and stick to it.

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