Car Finance

3 Bad Credit Car Financing Options: Best Auto Loans for Low Credit Scores


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The first place you may think of looking for bad credit car financing is on the Internet, and that's not a bad place to start. You will easily find individual auto finance firms online, or perhaps auto loan "supermarkets," which have you fill out your requirements before posting them to a list of lenders who will consider your loan.

1. Auto Loan Direct Lenders

These finance companies will sometimes tell you that seeking to finance a car with bad credit is easy, but the reality is often less positive. Remember that accepting an application is not the same as confirming a loan. However, such lenders will consider the nature of your poor credit situation. If it can be shown to be temporary or "situational," you may be able to improve your rating. If you can offer a larger down payment, this may also improve your chances of getting a loan.

2. Guaranteed Auto Financing Car Dealers

Guaranteed financing is the type of loan you will typically get from a dealer at a used car showroom. Very often, your credit history will not be an issue. It is the dealer who provides you with the loan for your car. You will need to make payments to the dealer, usually weekly and in person. This is a common way to finance a car with bad credit. It has the advantages of dealing with someone in person, making manageable weekly payments and, usually, avoiding credit checks. However, this finance method is usually only available on used cars with a relatively low value. Terms are usually over short periods of 12 to 24 months. If you fail to make payments, the owner will immediately repossess the car. If you need to restore your credit score, guaranteed financing won't help show regular payments, as such dealers rarely report payments to the credit bureaus.

3. No Credit Auto Loans

The best option when you're trying to finance a car with bad credit, may be to face up to your real situation—provided you're determined to improve your payment record. "No credit" and "bad credit" auto loans are available from some legitimate finance companies. Look for companies that specialize only in such loans and carry a high rating from the Better Business Bureau.

These companies accept that you may have a poor credit record, or no credit record, and aim to help you establish a good record with the loans they are able to provide. The system works because they have developed special relationships with auto dealers. Once you have been accepted, you will be invited to visit one of the affiliated car dealerships to choose your car.

Remember that even the most cooperative auto loan company will require you to show that you're able to take on a loan commitment. You will need to show recent wage slips and you should offer as much money as you can for a down payment. You will also likely be asked for cash to cover car insurance.

It can be tough to finance a car with bad credit, but if you use persistence and present the right attitude, the deals are out there to be found.

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