How to Find Car Financing With a Very Bad Credit History
You can establish auto financing with very bad credit to purchase a vehicle, but expect to put a large amount of money down and pay a high interest rate. If traditional financing is unobtainable, buy-here-pay-here lots are an option. Regardless of where you are going to finance, you should have your information in order, money to put down and time to spend on searching for your lender.
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Instructions
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Get your credit report to gain an understanding of your credit history and score (see Resources). Many people have different opinions of what "bad" credit is. Lenders consider credit history beyond a credit score. Determine if your delinquencies are aged, or several years old, and if you have revolving credit, such as a credit card or mortgage, that is in good standing. In addition to credit, lenders consider time at address and with employer as well as gross annual income. Two years or more on the job and at your home address are desirable by lenders. Also, debt-to-income-ratios are considered. This refers to the amount of money you have coming in versus the money that you owe every month. Lenders look at your mortgage or rental payment as well as any other payments due to lenders to determine if you have enough money to pay for a car loan. Someone residing at an address less than one year with only several months on a low-paying job is unlikely to receive a loan without a great deal of money down, even with good credit.
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Determine how much money you can put down toward a vehicle. Whether you go to a dealer or to a buy-here-pay-here lot, you need money down with bad credit. Buy-here-pay-here lots are usually more generous with the amount of money down required, while dealers, who use traditional finance methods, may require as much as 40 percent of a vehicle's value.
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Contact a large dealer, which usually works with a many banks, and explain your credit problem. You can call to save time or visit in person. Let the dealer run your credit before you look at vehicles. If the dealer has a bank that can help, it is in its best interest to use it. Expect to be asked about money for a down payment, and let the dealer representative know what you can afford. The dealer representative can call to the bank to see if a loan is possible for you. The bank may agree to finance or come up with a counter offer. A counter offer might include more money down or strict vehicle guidelines that limit year and mileage. If you receive an approval at the dealer, your search for financing is complete.
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Conduct an Internet search for "bad credit auto loans" to find a national lenders that may work with you if the dealership cannot find you a lender. You can submit an application within minutes. You may see a counter offer, or receive an approval based on strict guidelines. You'll have to provide this lender with proof of income, proof of residency and possibly tax information for several years' time.
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Go to a buy-here-pay-here-lot to discuss your options if you couldn't obtain financing through a traditional lender. A buy-here-pay-here lot does not base your loan on your credit rating. You will either get a high interest rate or pay more for a vehicle than you would elsewhere.
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Find a cosigner. A cosigner with excellent credit can solve your financing dilemma. If you can find a cosigner, you can qualify for low interest rates and low payments. A cosigner can be anyone you know, but because the cosigner is completely liable for a missed payment or repossession, you may find that finding one is difficult.
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Tips & Warnings
You may want to see if you can find a cosigner before applying to any lenders to save time.
References
Resources
- Photo Credit keys to the new car image by Jake Hellbach from Fotolia.com
