Are you currently shopping around for an auto loan with bad credit? In this case, you may have found that it’s a lost cause. After all, few banks or dealerships are willing to provide you with the necessary amount of money, and dealerships tend to attach incredibly high-interest rates with any of their financing offers. At the end of the day, you end up paying a whole lot more for your car than someone who has a favorable credit score.
However, all is not lost. Rather, there are still several things you could keep in mind during your pursuit. If you follow this advice, you won’t only find that it’s easier to secure that hard-to-find loan. Rather, you’ll also see minor improvements to your credit score, and these improvements will end up helping you out in the long run.
If you’re attempting to secure an auto loan with bad credit, take a look at our advice below. Before long, you’ll realize that the endeavor isn’t fruitless, after all…
Piece of Advice #1: Confirm Your Credit
You should never make any purchases based on assumptions, especially when you’re approaching an unfavorable situation like pursuing a car loan with poor credit. Occasionally, customers will assume that their credit is in disarray due to some ill-advised purchases and late payments on their credit card. They’ll then opt for a deal with incredibly high interest rates, but they’ll subsequently discover that this wasn’t necessary in the first place. While it may be a relief to learn that your credit is in good shape, you’ll still be stuck tolerating the deal that you opted for. This obviously isn’t ideal.
Instead of just assuming that your credit is in bad shape, refer to an online resource before you start your car search. Plenty of websites will provide insight into your credit situation, allowing you to have plenty of clarity before you head out on the car-buying excursion.
Piece of Advice #2: Work to Improve Your Score
It takes more than realizing that your credit score is in bad shape. Rather, you’ll want to understand how you ended up in that situation in the first place. By investigating what factors contributed to your poor score, you can better focus your efforts into improving your low standing. Meanwhile, if you find that your score actually isn’t in that bad of shape, you could work to pay off some faulty loans before pursuing a car. While these payments will do little to turn around your score right away, lenders or dealerships can at least see that you don’t have any debilitating debts to your name.
Furthermore, by exploring your credit report, you can see if there are any major discrepancies. Everyone makes mistakes, including creditors, and an on-time payment may have occasionally been listed as late. In this scenario, you can dispute the indiscretions. While this will take a bit of time to be reflected on your literal credit score, the improve standing will play a significant role in helping you secure a promising line of credit for that new car.
Piece of Advice #3: Shop Around
If your credit is in bad shape, we’re sure you’ve found that it’s difficult to secure that line of credit in the first place. Few lenders, whether they be banks or credit unions, are willing to take a risk on you. As a result, you’ll be forced to rely on de facto “buy here-pay here” dealerships. While these businesses do provide you with a unique opportunity, they still accompany incredibly high-interest rates with all of their rides. As a result, you’ll be forced to pay more money for the car in the long run.
However, all is not lost. Just because you’re forced to shop from a buy here-pay here dealership, it doesn’t mean you have to opt for the first deal that you come across. Rather, you should explore all of your options. Nowadays, there are seemingly unlimited dealerships that will be willing to provide financing on your next ride. As a result, you can legitimately shop around for the best possible offer. While the terms may not be all that attractive, at least you’re assuring that you’re not leaving more money on the table.
Piece of Advice #4: Secure a Shorter Loan
As we mentioned, the higher accompanying interest rates means customers will have to dish out more money for their car in the long run. Often times, dealerships will try to entice customers with longer-term loans, which vicariously reduces the monthly payments. While this may be an attractive opportunity, remember that you’re ultimately going to be dishing out more money in the long run.
Instead, assuming you have enough wiggle room in your budget, it’s in your best interest to shop for a shorter-term loan. The monthly payments will indeed be higher, but you won’t be responsible for paying the accompanying interest rates over several years. Instead, you can get out of this unattractive deal as soon as possible.
Piece of Advice #5: Stay Within Your Budget
We briefly touched on this point before, but it’s worth repeating: if you’re limited by your poor credit score, it’s in your best interest to pursue the most inexpensive ride possible. Sure, the new SUV sitting in the end of the lot may be alluring, and the dealership may try to convince you that it actually fits within your budget. Whether or not that’s true, it might not make a whole lot of financial sense.
Instead of opting for a car that contains all of those unnecessary bells and whistles, you should opt for a vehicle that simply provides you with the amenities that you need, not the amenities that you want. Sure, the driving experience may be slightly compromised. However, this attribute really shouldn’t be your focus. Rather, you should be zeroing in on a car that provides you with maximum financial flexibility. When you’ve finished paying off your vehicle, you’ll be happy that you made this decision.