Auto Loan Rates

How to Get Low Rate Auto Loans with Bad Credit


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Even if you have a low credit score, you can still secure a low rate auto loan. When shopping around for bad credit car loans, you need to remember that loan rates for borrowers with bad credit will be significantly higher than a borrower with a high credit score. However, there are a number of things you can do to secure yourself the best possible low rate auto loan.

Credit Score and History

You need to obtain a copy of your credit report and challenge anything on it that doesn’t look correct. You may find open accounts that are supposed to be reported as closed. That old credit card may show as a charge off when you actually paid it off. Write to the credit bureaus and challenge any entry that doesn’t look right. Make sure you have proof of the error; you will be asked to submit it with your dispute letter.

Offer a Down Payment

Offering a down payment is a positive way to show the lender that you're willing to be responsible for the loan you’re asking for. Additional benefits of a down payment include:

  • The need to borrow less money
  • Lower payments
  • Less risk to the lender
  • Increased profit for the lender
  • Potentially shorter loan term

Shop Around

Don’t take the first loan offer you receive. Keep shopping around and obtain a number of offers. Then sit down and compare them. Decide which one fits you and your budget the best. Find out how much late payment fees are. See if any of the lenders charge an early payment penalty for paying the loan off early. Some do, because the sooner you pay the loan off, the less they make in interest. Once you have the answers to all these questions, you can decide what your top two or three lenders are and make them barter for your business. If your preferred lender quotes a higher rate than other lenders, show them other quotes and ask them to price match.

Find a Co-Signer

A co-signer, sometimes called a co-borrower, is someone who promises to repay the loan if for some reason you are unable to. This negates much of the perceived risk a lender considers when issuing bad credit auto loans. Having a co-signor may feel like a crutch, but when you're just getting back on your financial feet, this could be the only way for you to get an auto loan. Just remember you're promising someone else’s money, and therefore need to make your payments.

If you have bad credit, you won’t receive the lowest rates available. But if you follow these steps, you'll be able to find a low rate auto loan with a low credit score, at a monthly payment you can afford. Work hard to make all your payments on time and pay down the principle with principle-only payments, to get out from under the loan faster. This will help your credit score improve, thus giving you the option of refinancing for a lower rate in the future.

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