Guide to Finding the Best Bad Credit Car Loans
Your old car just died and you need a new one to make it back and forth to work. The cost of repairs on your old clunker are costing you more than what a new-to-you car should cost.
Or maybe you’re just ready to trade up to the next best thing after several years with your current car. No matter your reason for needing a new car, finding car loans for bad credit can be a real hassle.
It seems that not many lenders are willing to take a chance on financing a car with bad credit history in tow. If you’re stuck between a rock and a hard place when it comes to figuring out how to finance a car with bad credit, AdvisoryHQ is here to help. We’re here to help you navigate the world of bad credit car loans with finesse.
If you need to know how to proceed with getting a car loan with bad credit, look no further than our objective and comprehensive guide to bad credit car loans.
Understand Your Credit Score
It may feel like there’s no hope to improve your credit score, but if you work at improving your score over time, you’ll no longer need to concern yourself with bad credit car finance.
The first step toward doing better in the future is to understand exactly where you stand right now. You should have some idea of where your credit score is so you know which bad credit car loans you qualify for.
First, consider requesting a free copy of your credit report. You are entitled to one copy of this report each year (AnnualCreditReport.com), and it’s a simple way to make sure that everything is correct.
If you have been the victim of identity theft or if an agency has been misreporting information, this is a fast way that could dramatically improve your credit score without requiring car loans for bad credit.
Image Source: CreditKarma
Lenders are most likely to examine your FICO credit score, but you can receive copies of your VantageScore credit score through free credit sites like Credit Karma.
These sites will show you where you stand according to slightly different formulas and help you to figure out where you can improve. They may make recommendations for other products or suggestions for things you need to do on a more regular basis to boost your score.
If you can get your credit score raised over time, the next time you need to purchase a vehicle, you won’t need to investigate bad credit car loans again. Your bad credit car finance days will be a thing of the past, and you can move through the purchase process with greater ease.
Evaluate Your Need
Can I get a car loan with bad credit? If you find yourself asking this question, you might need to consider asking yourself a different question first according to Consumer Affairs.
Do you really need a new car right now? When you find yourself heavily investigating bad credit car finance options and the different choices available for buying a car with bad credit, you need to take a step back and evaluate your need for a new car in the here and now.
When your primary mode of transportation fails you, it might be worth investigating car loans for bad credit.
You won’t be able to pay your bills or improve your financial situation long-term without the ability to get back and forth to work. However, you should keep in mind that there are alternative options such as taking the bus or hitching a ride with a friend.
These short-term solutions could buy you six months to a year in order to work on rebuilding your credit and qualifying for lower rates instead of those associated with bad credit car finance programs.
If it isn’t an emergency, experts recommend holding off on choosing car finance with bad credit. Sure, you could take on car loans with bad credit in order to drive a luxury vehicle, but better rates (thus saving money) can be had if you will just be patient for a season and improve your credit score.
Image Source: Bad Credit Loans Online
Scrape Together Your Savings
Used car loans for bad credit can be difficult to obtain even under the very best circumstances. Bad credit car loans are typically fraught with exorbitantly high interest rates, ranging as high as 18 percent in some parts of the country. Finding car loans for bad credit might sound easy, but you want to do everything you can to keep the rates as low as possible.
Carfax recommends that individuals financing a car with bad credit should scrape together the biggest down payment they possibly can. Not only does this decrease the overall loan amount, making it more likely for you to get approved by a lender, but it can also result in lower interest rates. The more money you can provide upfront, the more likely it is that you’ll see your rates decrease even on bad credit car loans.
If you think your car is close to the end of its lifespan, start putting away what little bit of money you are able to each month. You should have a nice emergency fund stored up by the time your car finally dies, making it just a little bit easier to find car loans for bad credit.
While you’re reconfiguring your monthly budget to accommodate your savings, you may want to get some of your other finances in order as well. Lenders are unlikely to issue used car loans for bad credit without seeing proof of your income. Go ahead and gather up documentation to prove your steady income, including your paystubs, W-2s, and bank account information. Proving that you are responsible and organized can go a long way toward convincing a lender that you’re worthy of bad credit car loans.
Window Shopping for Bad Credit Car Loans
Just because you have bad credit doesn’t mean you have to spring for the first used car loans for bad credit that you stumble upon.
As with most major purchases, you have a period of time during which you can browse the different rates and offers that lenders are willing to make in helping you out with getting a car loan with bad credit.
This two-week time period is an excellent time to talk with lenders apart from those at a dealership. Consider online lenders that can specialize in car loans for bad credit, your personal financial institution, and any local credit unions in your area.
It may be tempting to try qualifying for bad credit car finance programs at the various lots that advertise financing with no credit checks involved. Mostly known as “buy here, pay here” lots, these types of dealerships profit from individuals who have poor or no credit history.
The loans they offer through their various bad credit car finance programs have rates significantly higher than those of other dealers.
Not only that, but you could be taking a significant risk on the quality of the vehicle you purchase here. It isn’t uncommon to find that the vehicles on their lots were sold and then repossessed, only to be sold again to unsuspecting customers. These shady types of dealerships are worth avoiding, if at all possible.
Your credit can withstand being checked a few times during your rate shopping window, even if you know that you’re searching for car loans for bad credit. Buying a car with bad credit doesn’t mean that you have to be stuck with unnecessary interest and subpar cars. You just need to know how to be smart and find the best used car loans for bad credit.
Where to Go for Bad Credit Car Loans
Apart from the buy here, pay here lots that are heavily advertised and seem to specialize in sketchy used car loans for bad credit, getting a car loan with bad credit makes it difficult to know where to go. If you’ve asked yourself, “Can I get a car loan with bad credit?” you’ve probably also wondered where to go to get bad credit car loans.
There are a number of choices available for you, even if you do have subpar credit scores attached to your name. Financing a car with bad credit can be tricky, but popular online lenders have a lot to offer. They allow you to qualify for bad credit car loans from the comfort of your home without ever having to discuss your situation with a representative face-to-face.
Online lenders have a tendency to offer the best rates, and there are several that cater specifically to individuals who are buying a car with bad credit. Consider a few of these lenders that deal with customers who have less than stellar credit scores and are in need of bad credit car finance options:
- Auto Credit Express: One of the many benefits to Auto Credit Express for those who need car loans for bad credit is their openness to all ages, mileages, and loan amounts. Consumers with bad credit would be unwise to consider brand new vehicles, but many bad credit car loans exclude the older and more affordable models.
- Capital One: Some people feel comfortable searching for car loans for bad credit through any possible avenue, while others prefer the security of a well-known financial institution. The Simple Dollar labels this company as one of the best bad credit car finance choices.
Image Source: Auto Financing
- Carvana: For an easy shopping experience, Carvana will issue car loans for bad credit for cars purchased through their website. They will accept credit scores as low as 300, though each determination is made on a case-by-case basis.
Bad credit car loans are also more likely to be issued from your personal bank. Because the relationship between you and the bank is already in place, you are more likely to find approval for bad credit car loans and options for how to finance a car with bad credit through these avenues. Credit unions are likely to have rates that come in just under those of traditional banks by approximately 1 to 1.5 percent.
Use a Cosigner
Car finance with bad credit on your own can be next to impossible depending on the severity of your low credit score. You can still get car finance with bad credit, but it very well may need to involve another person. Consider the possibility of having a cosigner, if you’re positive that you can make all of your payments on time and can find another individual with better credit to help you along with your car finance for bad credit.
Consumer Affairs has created a list of qualifications for knowing how to finance a car with bad credit and a cosigner. You may want to consider having another person cosign for your loan if:
- You have a smaller down payment than most dealers or lenders would require.
- Your credit is too low for even bad credit car loans.
- You have more debt than lenders will allow.
- Your income tends to fluctuate on a monthly basis.
Be sure that your cosigner understands the implication of signing for you, though. Car loans with bad credit that fall through with a cosigner will saddle that person with the responsibility to pay off your loan. In order to avoid affecting the credit of your cosigner, you need to make all the payments on the car loans with bad credit.
Popular Article: How To Refinance a Car Loan | Guide on Auto Loans & Financing a Car
Refinance in the Future
If you’re wondering, “Can I get a car loan with bad credit?” the answer is most likely yes. Unfortunately, it isn’t likely to be the best terms or conditions. On the bright side, as you work on making your payments on time, the car finance for bad credit can definitely help to improve your credit score over the coming months.
As you know, an improved credit score can help you to qualify for more favorable loan terms in the future.
The good news is that as you work to improve your credit all around, you can always choose to refinance your auto loan in years to come. Refinancing your car loan with bad credit once it has led to a better score can help you to save tons of money over the term of your loan. You can qualify for better interest rates and could potentially lower your monthly payments as well or shorten your term.
Refinancing your car loans for bad credit can assist you in moving forward and taking a step toward a far more favorable loan in the future. While car loans for bad credit may be your only option right now, you can work toward improvement in the future.
Searching for car loans for bad credit can feel never-ending, but the good news is that there are several options available. Whether you choose to utilize the public transportation system over the next few months while working on your credit, to save up more for a down payment, or to investigate one of the companies that specializes in bad credit car finance programs, you have options for obtaining a new vehicle.
Spend time understanding your credit score and what you can do in the future to improve and qualify for better loans in years to come. You may need to know how to finance a car with bad credit, but you can qualify for something more favorable in the future.
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