People with bad credit can get car loans, and doing so is often a big step toward improving their credit score. Check your credit report and talk to several lenders before you apply for a car loan. Also, remember that once your credit score has gone up, you can refinance to get better rates.
Clean up your credit rating
One of the most important ways to get a loan is to have a good credit score. Even though foreclosures and bankruptcies can hurt your score for a few years, you can improve it right away.
Check your credit report for mistakes to start. Fix problems with your creditors and add a note to your credit record to explain what happened. Also, spread out your credit card debt so that you don't use more than 30% of your credit line at any one time. Your score can also go up if you have more cash on hand.
Check with lenders before going to car lots.
The best way to find a good car loan is to compare rates from a number of different lenders. This is best done before you look for a car.
If your score is in the 600s or higher, you should start looking at conventional lenders. If your score is low, look into subprime lenders who work with high-risk groups. Don't write off traditional lenders, though. Even people with bad credit can get deals from them. The key is to look into more than one company before applying to one.
Increase your scores
Even if you have bad credit, you can still get better rates. A rate drop may be possible if you put down at least 20% of the loan amount. Having a shorter term will also lower your rate and save you money on interest. You might also get a point or more off your interest rate if you buy from a dealership.
It's always possible to refinance.
Once you have found financing, remember that you can refinance if your credit score goes up. Rates on refinanced car loans are a little bit higher than rates on regular loans. You might also find that a home equity loan gives you better rates and terms.
Researching lenders and financing options will save you money and keep you safe from lenders who aren't honest.
