How to Get Approved for a Car Loan with Bad Credit
If you’re looking to get approved for a car loan but have bad credit, there are a few things you can do to improve your chances. Follow these tips and you’ll be on your way to getting the loan you need.
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Bad credit can put a damper on a lot of things, including loans. But it is possible to get a car loan with bad credit in 2018 — it’s just going to cost you, said Matt Jones, consumer advice editor for Edmunds, an online resource for car information based in Santa Monica, California.
If you have bad credit, you’re not alone. The Consumer Financial Protection Bureau reported that 26 percent of Americans have credit scores that fall below 601 — deemed “bad” by most lending institutions — and another 19 percent have scores between 601 and 660, which are considered “fair.”
What is a Car Loan?
A car loan is a type of loan that is used to finance the purchase of a vehicle. This type of loan is typically repaid over a period of time, with equal monthly payments. Car loans can be obtained from banks, credit unions, and other financial institutions.
Bad credit can make it difficult to get approved for a car loan. There are a few things that you can do to improve your chances of getting approved, such as:
-Make sure that you have a down payment saved up. A down payment shows the lender that you are serious about repaying the loan.
-Check your credit score and work on improving it. The higher your credit score, the better your chances of getting approved for a loan.
-Apply for a car loan with a cosigner. A cosigner with good credit can help you get approved for a loan.
Applying for a car loan with bad credit can be challenging, but there are things that you can do to improve your chances of getting approved.
The Process of Getting a Car Loan
There are a few things you should know and do before shopping for a car loan. First, it’s important to understand your credit score and what that means for getting approved (and at what interest rate). Second, always shop around for the best rates and terms. And third, be prepared to take action if you are denied a loan or offered unfavorable terms.
Finding the right lender is an important step in the process of getting approved for a car loan with bad credit. There are subprime lenders that specialize in financing loans for people with poor credit, and there are also more traditional lenders that may be willing to work with you if your credit score is low but not terribly bad. When shopping around for a loan, it’s important to compare offers from several different lenders to make sure you’re getting the best deal possible.
The information you’ll need to get started shopping for a car loan includes:
-Your Social Security number
-Your driver’s license
-Proof of insurance
-Employment information ( pay stubs or offer letter)
-Income information ( tax returns or bank statements)
-The make, model, and year of the car you want to buy
-The price of the car
Types of Car Loans
There are three types of car loans that you can choose from when you have bad credit. You can get a loan through a dealer, a bank, or a credit union. Each type of loan has its own set of benefits and drawbacks. Let’s take a look at each type of loan in detail so you can decide which one is right for you.
Secured Car Loans
A secured car loan is a type of financing where the borrower pledges an asset, such as a vehicle, as collateral for the loan. This means that if the borrower defaults on the loan, the lender can seize and sell the asset to recoup their losses. Secured loans typically have lower interest rates than unsecured loans, making them a good option for borrowers with good credit. However, borrowers with bad credit may still be able to qualify for a secured loan if they are able to provide collateral.
Unsecured Car Loans
Unsecured car loans are loans that are not secured by an asset, such as a car or house. These loans are often called personal loans and can be used for any purpose, including buying a car. Unsecured loans typically have higher interest rates than secured loans because they are more risky for lenders. When you default on an unsecured loan, the lender cannot take your car or house. However, they can still take legal action against you to collect the debt.
How to Get Approved for a Car Loan with Bad Credit
If you have bad credit, you might think that it’s impossible to get approved for a car loan. However, there are a few things you can do to increase your chances of getting approved. First, you should try to get pre-approved for a loan from a lender that specializes in bad credit loans. You can also try to improve your credit score before you apply for a loan.
Improve Your Credit Score
Your credit score is one of the most important factors in whether or not you’ll be approved for a car loan. The higher your score, the better your chances of getting approved. If you have bad credit, there are a few things you can do to improve your score before you apply for a loan.
One of the best things you can do is to make sure you pay all of your bills on time. This includes both big bills like your mortgage or rent, as well as smaller bills like credit card payments and utility bills. You should also try to keep your balances low on your credit cards, and avoid opening new credit cards or taking out new loans if possible.
In general, it will take some time to improve your credit score enough to get approved for a car loan. However, if you start working on it now, you may be able to get approved sooner than you think.
Get a Cosigner
One of the quickest ways to improve your chances of being approved for a bad credit car loan is to find a cosigner. The cosigner is essentially taking on responsibility for the loan, which means that the lender is more likely to approve the loan.
Of course, this option is not available to everyone – you will need to find someone who is willing and able to cosign for you. They should also have good credit, as this will further improve your chances of being approved for the loan.
If you do have a cosigner available, be sure to shop around for the best deal on a bad credit car loan. While having a cosigner will improve your chances of approval, it does not guarantee approval – so you still need to find a lender who is willing to work with you.
Find a Specialty Lender
If you have bad credit, your best bet for getting approved for a car loan is to find a specialty lender. There are a number of subprime lenders that focus on working with borrowers who have poor credit.
If you go this route, make sure to do your research and choose a lender that has a good reputation. There are a lot of shady lenders out there that will take advantage of people with bad credit.
Once you find a reputable lender, the next step is to fill out an application. The lender will then pull your credit report and score to see if you meet their lending criteria.
If you are approved, the lender will give you a loan offer. Make sure to review the terms of the loan carefully before accepting it. You don’t want to end up in a situation where you can’t afford the payments.
If you decide to move forward with the loan, the next step is to finalize the paperwork and get the money you need to buy your car.