Experian states that an estimated 16% of Americans have bad credit, while 18% of Americans have fair credit. Since only 1.2% of Americans have a perfect credit score, it’s safe to assume that everyone is struggling to keep their credit score viable, while also getting the basic necessities of life – like driving a car.
But if you have bad to fair credit, then you’re probably wondering if you’ll even qualify for a car loan. There are always options, even if you’re not batting a perfect score.
Read on to find out what avenues there are for motorists with bad credit who still need a lift.
Before you shop for a new loan, get the note down to as little as possible. With enough money for a down payment, you’re more likely to get approved for a car loan right off the bat, even with bad credit. Doing so can also help to offset higher interest rates and can serve to lower your loan-to-value ratio, which helps you in the long run to qualify for a loan with better terms.
Some online companies could offer loans for lower rates especially made for consumers who have bad or average credits.
Online lenders can also check your prequalification for loans through multiple companies and find the loan that works best for you. Prequalification is crucial to make sure that you’re eligible for the loan before you even apply.
Once your loan is pre-approved, this gives you leverage at the dealership and gives you the negotiation strategies of a cash buyer. Always make sure the final terms are actually final, so that there aren’t any hidden rates.
Check out some more online auto loan options for poor credit opportunities.
With car dealerships, you can set up financing options through a loan with the dealer. If you have a bank account or a credit union account in good standing, you can see about getting a loan through them at discounted rates.
Other options you could consider for shopping for a car loan include banks and credit unions, “buy here, pay here” car dealerships, and regular brick-and-mortar car dealerships.
You could even refinance your current loan, if you already have a car. We published an article on auto refinancing strategies just recently.
Familiarize yourself with the car you’re looking to buy, how much monthly payments are going to be and what APRs are most common with the loan option(s) you’re looking into.
With a lower credit score you’re more likely to find loans with higher rates. Kelley Blue Book values come in very handy and you should consider looking up the value of the vehicle you’re looking at prior to shopping for a loan.
In financial terms, subprime lending is loan provisions for people who may have a hard time paying their loan payments on time.
However, many of them have predatory loan practices and should be avoided – especially if you can shop reasonable loan terms, and not shop based on just lower monthly payments.
Since car loans for people with bad credit have higher APRs on average, you might end up paying far more than the car is actually worth on the market due to the accumulation of interest.
While shopping around for a loan, make sure to look for the most favorable terms for your situation, and if you’re unable to find a lower APR you may have to look for another car.
6. When in Doubt, Bring a Friend and Consider a Co-Signer
The best thing you can do when you’re unsure of whether or not you’re about to get a good deal is to bring a friend who’s more knowledgeable about car interest loans and ask them to co-sign with you if at all possible.
Loans that are co-signed have a stronger chance of going through and being approved.
Having bad credit means you’ll have a harder time finding a car loan, but that doesn’t mean you should give up.
By far, most people need a car for daily living and if you have some means of income, you will always have offers. Whether you’re unemployed and looking for a job, or are going to school online, you will always need a vehicle for emergencies and weekly grocery trips.
You start with a simple credit score check. Knowing your score, and how to raise it, is the first step. There are plenty of offers out there for people to get an auto loan without any credit or bad credit, so why not explore all of your options?