Best Auto Loans for Individuals With Low Income and Bad Credit
Auto loans for individuals with bad credit ratings are nearly always extraordinarily expensive. The lower your income and the worse your credit rating, the more difficult it will be to get approved for an auto loan. Expect to pay high interest rates, a large down payment and be subject to many penalties and fees if you fail to make loan payments on time. To get the most affordable auto loan possible, there are a several strategies you can use to improve your chances of getting a loan.
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Preparation
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Even if you have bad credit and low income, if you prepare for applying for an auto loan for at least three months, you will greatly increase your chances of winning approval for a more affordable agreement. Pay your bills on time. Make an effort to pay off the balance of all your credit cards every month leading up to the auto loan. Settle any delinquent debts before applying. If you can demonstrate an improved credit history for at least 90 days leading up to your loan application, lenders may be willing to give you more favorable terms. Saving up for a down payment during that period of time will also demonstrate your improved financial responsibility to potential lenders.
Finding the Best Bad Credit Auto Lender
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The most important element of finding a bad credit auto loan is to work with a responsible lender. Consider working with a dealer network instead of searching for individual lenders. These networks will take your financial information and market it to various lenders in your area that serve customers with bad credit. You may then choose the lender that gives you the strongest deal. Examples of such networks include Finance Firebird and Car Loans Quote Form.
Cross-reference the companies that offer you loans with the Better Business Bureau database (see the Resources below) to ensure that you choose the best lender for your needs. When you find a lender that offers an attractive rate, explain your financial situation as clearly as possible. Work out a loan that fits your financial situation that you can be reasonably assured that you can afford with your current income.
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Choosing the Right Car
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Bad credit auto lenders will usually only provide financing for a certain set of cars. Ask the lender what cars they are willing to finance and choose the one that fits your needs and is affordable. A used car will generally be much easier to finance than a new one. Bad credit auto lenders also prefer cars that are relatively stable in value so that the balance of the loan can be easily recovered in the event of repossession. If your income is low, it's wise to choose an inexpensive, safe car that you can also afford to insure.
Down Payment
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Make a larger down payment than necessary when purchasing a car with a bad credit auto loan. You're also more likely to be approved for an auto loan if you can make a larger initial payment. This will also reduce the size of your monthly payments and the overall interest that you pay for the car over the lifetime of the loan. On the other hand, the larger downpayment means you take on more risk if the car depreciates faster than you might have anticipated, but the savings on the monthly payments will likely make up for it.
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