How to Get a Car Loan With Horrible Credit
Borrowers struggling with bad credit might be intimated when applying for an auto loan. Faced with the thought of rejection or high interest rates, they procrastinate filling out applications. According to Edmunds, a company that provides automotive education to consumers, having poor credit doesn't mean your borrowing days have ended. Fortunately, a buyer has one thing going for him. A vehicle loan is secured, which means it's less risky for financial institutions. There are still plenty of options for borrowing. Understanding exactly where you stand credit wise and shopping auto loan rates can help.
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Instructions
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Order a credit report. Even if you have bad credit, there could be errors on your credit report dragging down your credit score. Consumers are entitled to a free credit report once a year (see Resources). Review the credit report carefully. Look for inaccurate reports of late payments or collection items. File a dispute with the reporting bureau (TransUnion, Experian or Equifax) through its web site. Credit bureaus typically respond within 45 business days to dispute requests. Cleaning up these items will make it easier to get a more reasonable interest rate.
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Shop auto loan rates. People with bad credit can still shop around, according to Edmunds. Companies such as Bank Rate post auto loan rates online. In the drop down menu, you can include your credit rating. This allows consumers to find the best rate, based on their credit rating.
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When shopping for auto loan rates, don't forget to check out credit unions. Many of these financial institutions make local lending decisions. This means a branch manager makes auto lending decisions and has more flexibility. Often times, they'll be willing to hear your whole story. Perhaps you suffered serious illness and struggled paying bills on time. However, you can explain what you've done recently to settle accounts.
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Consider dealership financing. Dealerships have a variety of auto loan options tailored to people struggling with poor credit. Consider these options after you've done your research. Inform the dealership of the best rate you found. Ask the dealer to match it.
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Tips & Warnings
Pay attention to derogatory information on your credit report such as collections and late payments (items that are accurate). Handle these items right away. Contact collectors and work out suitable payment arrangements. Set-up automatic payments from your bank account to establish timely payment history. These actions will help boost your credit score.
Don't get discouraged if your auto loan is denied. Try another lender. If you can, wait several months and focus on improving your credit score. There are still options.
