10 Tips for Getting a Car Loan with Bad Credit
According to FICO, the average credit score in the US is 700. Anything over 740 is considered a very good score, while a rating below 669 means you may struggle to secure credit from lenders. A bad rating can cause major problems when trying to get an auto loan for a car through a bank. Even if you’re looking for a used vehicle at a low rate, you may be viewed as too much of a risk. There are solutions, though: take a look below to discover our top 10 tips for getting a car loan with bad credit.
1. Familiarize Yourself With Your Credit Report
First things first: know your credit score. Take a look at your credit report and make sure everything’s correct. You are entitled to one free credit report per year from each of the three major credit reporting agencies: Equifax, Experian, and Trans Union. If there are any mistakes or inaccuracies, your score could be lower than it could be, so take the time to go through it and confirm it’s all correct. Once you know what you’re working with, you can start taking action to get your loan.
2. Research Used Car Dealership Financing Options
Reputable used car dealerships offer in-house financing options for customers with all levels of credit ratings. Getting a loan for a used car will be much easier than for a brand new vehicle. Even if you have a poor score, you may still be able to secure an auto loan with good repayment plans to suit your budget.
3. Think About Your Finances Carefully
How much can you afford to pay each month for your car payments? Do you have enough income to cover everything you need to, such as insurance, gas, regular maintenance and potential repairs? You must be absolutely sure of how much you can spend, factoring all of your other monthly inancial commitments into your calculations. Once you’re approved for an auto loan, you have to stay within your budget.
4. Put Money Aside For Your Down Payment
A down payment is often required when buying a used car. A good dealership will keep this as competitive as possible, but you’ll still have to make sure you can afford it. Put a little cash aside here, there, whenever you can. This will ensure you have what you need to purchase your vehicle and avoid disappointment.
5. Understand Which Car Is Right For You
When buying a used car, you might not be able to get one with the latest bells and whistles or a fancy sports model like you’ve seen in glossy commercials, but you’ll still have a realistic range of alternatives available to you. Take the time to look into the type of used cars available at your local dealership, and figure out which best fits into your lifestyle, responsibilities and budget, and avoid the temptation to choose one that pushes your finances to the limit.
6. Be Realistic About Your Money
Staying out of debt is important for all of us, no matter what your financial situation may be, however, it’s absolutely critical when you have bad credit. If you fall behind on your payments, your car can be reposed and you’ll be unable to take out future loans for quite some time. This will leave you with increasing demands for payment with no way to manage them. Don’t try to convince yourself that you can afford more than you really can. Be completely honest with yourself and your dealer when discussing your finances and make sure they know how much you can really afford to repay each month.
7. Rebuilding Your Credit
When you have bad credit, you should make rebuilding it to a higher level a priority. While this may sound like a daunting task, many people actually manage to do it. Taking out an auto loan gives you an opportunity to improve your credit rating; you just have to make your payments on time. Think about setting up automatic payments or reminders to eliminate the risk of missing them. Other steps you can take include paying your credit cards promptly, keeping the balances as close to zero as you can, and not applying for new credit cards too often, as this will affect your score.
8. Reduce Unnecessary Spending
To stay on top of your auto loan payments, you have to make some tough decisions. There are certain financial commitments you can’t let go, such as rent, mortgage, medical insurance etc. However, you could be spending money on things that aren’t quite so essential, and reducing or eliminating those nonessentails will put you in a better position to make your car payments on time with more certainty.
9. Get Pre-Approved
Most used car dealerships offering in-house financing services have online applications that enable you to get pre-approved ahead of meeting with them. This can streamline the entire process and help you move towards getting your loan faster and easier.
10. Discuss All Your Options
Make time to discuss all your used car and financing options with your dealer. Ask them about the amount you can expect to receive, how repayments work and what type of vehicle you’ll be able to afford. An ethical dealership will be happy to talk your options through and help you find the right used car for your needs. Be clear about your driving habits, the type of passengers you usually carry and the number of miles you tend to drive per week or month. This makes it easier to match you to a car that best fits your needs.
Want to learn more about getting a car loan with bad credit? G & E Motors has over 20 years of financial experience helping customers with bad credit get auto loans for used cars. Just pick up the phone and give us a call, or fill out our simple financial form to get pre-approved. We’ll get you approved quickly, enabling you to start searching our extensive online inventory for your ideal vehicle. The G & E Motors team is always available to provide you with all the details and options to get you into the car, truck, or SUV that’s right for you.