Constant rejection because of your bad credit? Do you think low interest rates are only for people with good credit? Think buying a car is just a distant dream for you?
Well, this information can give you relief and significantly increase your chances of getting a cheap car loan. Last month, Reuters published an article entitled “Auto lenders ease lending standards and conditions to boost credit.” It is mentioned that lenders consider car loans safe compared to mortgage and credit card loans. Also, lenders are now offering softer loan terms due to weak loan demand. One of the credit bureaus, Experian, mentioned that the percentage of new auto loans being offered to subprime borrowers rose 11.4% this quarter from a year earlier. This means that people with bad credit can even buy a new car without any problems.
So today it has become possible to get car loans with bad credit. There’s no better time to buy the car of your choice. But still not sure if you can get a cheap car loan? If you’re still in doubt, use these strategies and not only get instant approval for your bad credit car loan, but also take advantage of the lowest interest rates possible.
Preparation is key
Buying a car is an important decision because you are spending your life savings on it. It is an obligation to make regular payments. You simply cannot go to a retailer without doing thorough research. So before you buy a car or apply for a car loan, here are some important things that need your attention.
Clean up your finances first
If you’re looking to buy a car, don’t rush your decision. You do not have to sign the dotted line until you are sure what you are agreeing to. There have been instances where lenders have scammed harmless borrowers under the pretense of bad credit.
It is always important to study your credit report before visiting the lender’s office. You can get a free annual copy of your credit report from annualcreditreport.com. Study all entries and dispute unjustified transactions and errors. It’s well known that credit bureaus make mistakes when calculating your credit score. You can improve your credit score by eliminating all mistakes. Also, start paying off your debts. Even if you can pay off part of your debt, this has a positive effect on your creditworthiness. All of this takes time and therefore you need to plan your car purchase comprehensively and avoid making a rash decision.
Deposit to lower your rates
The initial upfront payment you pay to buy a car can be a useful way to lower interest rates. A sizable down payment of ten to twenty percent can lower your loan amount and therefore the lender’s risk. Also, the lender is assured of your financial stability. This will definitely lower your car loan costs.
Co-Signer – A peace of mind for the lender
If you have someone to co-sign your auto loan agreement, the lender is safe with their money. This is because if you miss payments, he can get it from the co-signer. Finding a co-signer is a bit tricky, but if you can manage one it would do wonders for your car loan.
If you just can’t find a co-signer, you can avail no-co-signer car loans that come with slightly higher interest rates. Still, it is important that you exhaust all possibilities before deciding on no co-signer car loans.
Online car loans with bad credit – a better option
An online bad credit car loan offers you an opportunity to get a car loan without leaving the comfort of your home. You can apply by logging on to your computer. Online auto finance companies are a perfect choice as banks do not entertain people with bad credit. In order to claim money from a credit union, you must be a member of it. When you apply for a car loan from an online car financing company, you have the opportunity to compare several car loan offers. This is not possible when using dealer financing.
Also, online auto finance companies work with several subprime lenders, making it easier for them to process your auto loan application. This greatly improves your chances of getting a low-interest car loan with bad credit.
How to choose your car loans with bad credit
Choosing a bad credit car loan is easy if you read the car loan agreement carefully. It is important that you do not just focus on low interest rates, but think outside the box. Calculate the Annual Percentage Rate (APR), which gives you the interest rate for a full year instead of the usual monthly rate. It also takes into account fees like loan origination fees and other various expenses that give you a better idea of the cost of a car loan.
Watch out for a prepayment penalty, if any, as it can significantly increase your expenses if you decide to repay your loan early. Make sure the lender is a reputable name in the auto finance industry.
A little caution can help you find the best car loan option. Bad credit is never a problem if you know how to deal with it. These strategies and key pointers will help you get an easy approval for your car loan application.
Remember bad credit is just your story; It is in your hands to write your future. Go out and make your car dream come true!