If you have bad credit, an auto loan can sometimes seem like it is completely out of reach. However, you will be pleased to know that there are many lenders willing to give you a second chance at buying a car on credit and to helping you reestablish your credit rating. You will pay higher loan rates than people with good credit and you may be required to meet some strict guidelines for the car loan approval.
There are several loan lenders who work exclusively with borrowers with bad credit. These lenders understand the plight of bad credit borrowers and work with financing groups and others who specialize in finding loans for these type of lenders. Although many auto loan lenders have tightened their lending standards for people with bad credit, certain lenders will work with a bad credit borrower to find ways to finance their car.
It is best to address your credit situation before applying for a loan. Getting a copy of your current credit report will help you see where you stand and also see what a lender looks at when deciding your loan rate. A credit score below 600 to 650 is considered extremely low for many lenders and will result often times in a denial of the car loan.
Often times, however, a poor credit report is the result of erroneous information that has been reported on your credit file or items that should have been removed. Under the requirements of the Fair Credit Reporting Act, you are entitled to a current copy of your credit report at least once a year from the 3 main credit reporting bureaus. Be diligent in your efforts to follow up with each in order to determine what your true credit score is and remove any items that reflect a lower score. The higher the score you have, the easier it is for you to receive a loan.
After pursuing the process of checking and making fixes to your credit record, contact several different loan lenders to inquiry about their rates and loan process. You will find that not all lenders are the same with respect to their requirements and what you need to do in order to qualify for a loan. By contacting several lenders you will be able to compare their rates and loan process, choosing the one that offers you the best opportunity for a bad credit loan.
Feel free also to negotiate hard with the lender in order to lower the rate if possible. This can be accomplished by putting down a higher down payment for the car or other collateral that is sufficient to cover the cost of the loan in the event of a possible loan default. The negotiation process may yield a good result for you in the end and put you closer to receiving a loan on the car that you want and need.