Getting bad credit auto loans with no cosigner is a difficult process but if you are flexible on the vehicle you want and the amount you are willing to put down, you will find a credit approval. Be aware of the methods and techniques required in order to get the loan without a cosigner, be prepared for high interest rates (up to 24.99 percent APR or the maximum in your state), capped amounts that limit the maximum financed and high down payments.
The first step toward getting a bad credit auto loan is to go online to a service like www.myfico.com and get an idea of your current credit position. If your credit score is below 500, you’ll find it difficult to qualify, even for a bad credit auto loan, without some down payment. If you are in a bankruptcy that has not been discharged, you will also find it near impossible to secure financing. If you are in this situation, wait until your bankruptcy has been discharged before starting your search.
When it comes to bad-credit car loans, the more cash you have to put down, the better your chances of an approval. Most car loan lenders will require that you participate in the car purchase by making a significant down payment to demonstrate your commitment in the car purchase.
Lenders require larger down payments for a couple of simple reasons: they want to reduce their amount of exposure or risk in loaning money to a person with past credit problems; and they know people don’t default as much on loans where they have a larger down payment invested. So, save up for a decent sized payment and greatly improve your chances of being approved for the loan.
In order to further improve your chances of getting approved for a bad credit auto loan, you should choose a vehicle that is affordable and practical. Although you may want to choose a fancier and more expensive vehicle, opt for a vehicle that is more affordable, practical and reliable.
Lenders that make bad credit auto loans are much more likely to approve loans for vehicles considered to a better value than loans for expensive luxury or sports cars. More practical cars cost less and will also help keep the amount in interest rate charges you pay to a minimum. Look for practical vehicles that have good or excellent resale values. As these are more attractive to lenders because they are usually more reliable and make better collateral in the event you do have the return the car or default on the loan.
When you contact a dealership, be up-front about your situation. They appreciate honesty and it saves time for everyone. A proactive dealership will take your credit information over the phone and begin going to work for you before you visit. When you do test drive pre-owned vehicles while considering a bad credit auto loan, don’t expect the vehicle to be perfect. It will be several years old and may have 50,000 miles or more on it. Just look for something that is reliable, practical and that you can see yourself driving until the loan is paid in full.
When you settle on a vehicle, don’t expect to negotiate much on the price, as any negotiations focus on the monthly payment. Also, the dealer may be forced to pay a large bank fee to secure financing. With bad credit auto loans, most lenders don’t allow the dealership to pass on any bank fees to the customer. The dealership must instead take this amount directly out of their gross profit to help you get financed.
When it’s time to discuss the contract and finalize your bad credit auto loan with no cosigner, be prepared to provide proof of address (in the form of utility bills), proof of income (in the form of three month running pay stubs) and proof of finances (in the form of three months running bank statements). You will also be expected to place a down payment. The down payment will vary based on the structure of your particular transaction, but will be significant to help offset the risk that your bad credit loan poses, especially without a cosigner. The special/secondary finance director at your dealership will help you understand your obligation, the terms of your contract and how this loan can help you reestablish your credit one payment at a time.
While car loan lenders may request copies of utility bills, others may require proof that you have a checking or savings account in good standing, so make sure you have all of this information readily available upon request. The more prepared you are, the faster the application process will proceed and the more likely you are approved.