Auto Loans For People With Terrible Credit – 3 Tips

It is pretty simple – if you are like 99% of us: you need an auto loan if you want to own your own car. This is a basic truth that many of us have come to know the hard way. If you have a bad credit score – or even terrible credit – you know all-too-well the pain and frustration of getting rejected for an auto loan based upon that one little score.

Why Auto Financing Is So Hard When You Have Bad Credit

When it comes to getting a loan for any large purchase such as a house, car or even a big screen TV, the way that the financial system has worked for decades has been intimately linked with one’s credit score.

Essentially, the credit, or FICO, score is what it all boils down to.
If your score is strong (say, over 700), you will have no trouble getting approved for a loan (and, usually at an excellent rate at that). If you have a good score of 600 – 700, you will almost surely get approved for a loan. However, if you have a bad or terrible credit score below 600, you may not even get approved. If you do, it will likely not be at a good interest rate.

And, in the past few years, the financial industry has become even more focused on the credit score as being the end-all, be-all of determining your eligibility for an auto loan.

What Most Financing Companies Ignore

It makes logical sense that auto financing companies would want to protect their investment when they extend someone a loan. Hence, the focus on the credit score.

However, most lenders ignore the fact that there is other important information about a person – beyond just the credit score – that can be used to assess a risk-worthy loan applicant. Most companies take the easy road of only looking at the credit score.

The Good News: There Are Alternatives

Fortunately, there are some companies which make it their business to work with loan applicants who have terrible credit. These companies tend to look at the person’s overall picture when making decisions about offering auto loans to applicants.

Auto Loans For People With Terrible Credit: 3 Tips

If you have bad or terrible credit but need an auto loan, these 3 tips can help:

1. Know the score (ahead of time): Take a few minutes to research your credit score. Find out your score from all three of the major credit bureaus. Knowing your score will help you be prepared when you speak to lenders.

2. Prepare your other vital statistics: This is important: pull together any documents you have showing how much of a stand-up person you are. This includes past and current employment records, any professional associations you belong to, and even good driver discounts from your insurance company.

3. Reduce your loan amount as much as possible: Finally, before applying, make sure you plan buy as low-priced a car as possible. And, try to save up as much as you can for a down payment. Doing these two things will reduce your loan amount and increase your chances of getting approved.

Finally: make sure to apply to at least 5 lenders to increase your chances of getting a low rate.

Follow these 5 tips when applying for an auto loan with bad credit.

Tags: Auto, Credit, Loans, People, Terrible, Tips