Getting a car loan can prove a nightmare for most people, especially if they have bad credit. But how come people with bad credit still end getting approved for bad credit loans on a daily basis? While it is true that getting through the application process for a loan with bad credit is not a walk in the park, it doesn’t mean that you are cut out of the loans. There are ways you can increase your chances of being approved for a loan to buy the car of your dream.
Without a doubt, lenders look at credit scores when determining whether or not to offer a car loan. They use FICO Scores, one of the popularly used credit scoring models that can place a borrower on a scale of 300 to 850 with a score below 700 being fair or poor. With poor or lower than average scores, many lenders may be skeptical about lending you money because of the perceived high risks. However, with proper strategies and tips, and research, you can still find a good Car Loan Interest Rate to suit your needs.
Steps to Take Before Applying for a Car Loan
Check Order for Your Credit Scores—and where necessary Improve Them.
Perhaps the smart way of starting off with taking out a loan is checking your credit scores. There are organizations that allow free credit reports to help you have a clear view of your credit position and whether it can affect your application for a loan. By knowing that your credit scores are in good shape, you can apply with lots of confidence since you know that your credit scores will favor your application and get you the best rates. Otherwise, if your credit scores are lower and feel they will adversely affect your application, you can wait as you work on improving your scores before setting out to apply for your car loan.
Shop for Lenders Who Consider People Like You
If you have been unable to get approved for a loan from traditional lenders because of bad credit, it is good to take your time and research lenders whose purpose of existing is to serve people who are troubled with bad credit like you. Typically, these types of lenders will always be ready and willing to offer you a car loan albeit at higher interest rates, so you will need to brace for higher payments. Nonetheless, they are the best places to go if you have run out of options.
Think about Auto Dealerships
You can also consider researching auto dealerships who say they work with lenders to help people with bad credit buy cars. Essentially, these have established working relationships with lenders who are willing to accommodate subprime borrowers. In some cases, there are dealerships that will finance your car purchase, so you won’t struggle with researching numerous other financial institutions or online lenders.
Whichever option you settle on, be sure to assess the quality of the service, but most importantly work out the cost to ensure it is the most affordable option that is available to you.