How to Get Auto Loans With Bad Credit

Tired of driving around an old, broken down clunker, instead of a brand new, gas efficient vehicle? Although the Cash for Clunkers rebates has made it easier for some people to get a new vehicle, it does not completely clear up the issue of paying for a brand new car. Moreover, not everyone interested in purchasing a new car, truck or SUV is eligible for Cash for Clunkers, making it even harder to cover the costs to afford a new car. What's worse is that getting auto loans with bad credit can be a difficult process if you're not prepared.

The fortunate thing is that there are ways in which you can get an auto loan, even if your credit is bad. And you don't have to immediately accept the first offer handed up to you from a dealership or financial agency -- you have the option to pick and choose in order to get the best offer possible. Read on to learn more about how to get auto loans with bad credit.

Instructions

1. Find out your credit score. While you may be under the impression that your credit score is low -- be it due to bankruptcy, oustanding accounts, or some other issue -- you should know precisely what your credit rating is with each of the three major credit reporting agencies (TransUnion, Experian & Equifax). The sort of auto loan you get will hinge upon your credit rating, so it's a good idea to know what to expect. When getting auto loans with bad credit, the lower your credit score, the higher your interest rate on your auto loan is likely to be. If your credit score is under 520, it's not a good idea to get an auto loan. Interest rates can be as high as 29%.

2. Check over your credit report for any inaccuracies. Sometimes there are mistakes on your credit report that will damage your score. Make any corrections if necessary. It is your legal right to contest any inaccurate information on your report.

3. Buy a car at the end of the month. Sales managers are much more likely to give you a more reasonable deal during this time because they want the highest number of sales they can get by the end of the month.

4. Try a first-time car buyer program, if you've never purchased a car before. They can help you in getting a good loan.

5. The best way to get auto loans with bad credit is to have someone with excellent credit co-sign your loan. A co-signer with a credit score of 700 or more is going to considerably lower your interest rate. Keep in mind, however, that if you default on your loan, your co-signer will have to pay for it.

Tips & Warnings

• It's a good idea before you get a car loan that you have a new car budgeted in your monthly expenses. You should be making at least $1200/month, since car loans can be as much as 20% of your income.