Have you filed for bankruptcy? Fallen behind in your credit card payments? Or are you self-employed? If any of this is true for you, you are a risk to lenders. They will be less likely to accept your application for a car loan and this can pose a problem for you.
However, having bad credit should not jeopardize your need for a car loan. You can still qualify for a bad credit car loan, as there are companies that finance people with bad credit and help them purchase a car. If you acquire one, you can see your credit card score improve, but where should you start? Here are some tips to help you acquire a car loan even with bad credit:
1. Search for Lenders
Do not call up one lender, but call up as many as you can. Even though most of them will reject giving you a loan, you should not give up trying to find. Some lenders may see your damaged credit card score in a positive light than others and may qualify you for an auto loan. There are companies that are specifically set-up to provide auto loans to people with bad credit. You can try them as well.
2. Begin Your Search Close to Your Area
You need to search in your area to find a lender willing to accept your loan application. You need to visit your bank and your credit union. Apply for a loan at the bank first and if they do not give it to you, visit your credit union. Moreover, find out if your insurance company or your employer provides auto financing.
3. Target Your Search Specially to Car Loan Companies
As mentioned before, some companies cater to a target audience with bad credit. They provide car loans to people who are unable to acquire a loan from their bank or credit union. These sources are known for giving out car loans more than any other type of loans. These include regional banks, local banks, and reputable online lenders.
4. Choose Lowest Percentage over Shortest Payment Plan
When shopping around for a car loan, you need to look for the lowest percentage over the shortest payment plan. The lenders may advise you to take out a loan extending over a long period, but do not become sidetracked and take it. If the only way you can make the car loan payments is by taking out a loan for a long period, take it.
5. Do Not Fall for the Yo-Yo Scam
The yo-yo scam occurs when the lender informs the person they need to make more monthly payments or they have increased their down payment after a few weeks or days. Victims of the yo-yo scam tend to pay five points more in interest rates than a person who is not a victim.
You can get a car loan with bad credit, but you will have to conduct extensive research to find the best one.