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Does Bad Credit Stop You From Taking A Car Loan?


In today’s world with the recent economic collapse, it’s natural to accumulate huge debts and get a bad credit rating on your credit report. As a result, many people become stuck with bad credit and can’t seem to get any assistance from any financial institutions that would otherwise be in an ideal position to help them.

Fortunately, it is still possible to get car loans for bad credit, all you have to know is what to do and where to go for the best offers!

car loan

Start by researching car loan deals thoroughly either from credit unions or your bank. Generally, credit unions provide low interest rates, but approaching your bank will be a good idea because you already have a relationship with them and they know all about your transactions each month; having access to this information puts them in a better position to assess the likelihood of you repaying the loan.

By getting loan approval from banks or credit unions, you can go to the dealership and show the interest rates you are getting, which improves your chances of negotiating with the dealer to be able to get comparatively lower interest rates. An individual with a bad credit score needs to pay high interest rates compared to good credit score holders.

The lenders will want to minimize the associated risk of lending to someone with a poor credit history and so will levy higher interest to offset that risk. However, you can look around for different lenders who may have more reasonable offers.

If high interest rates are not feasible for you, then the alternative is to offer an amount as a deposit for your car. This is beneficial in two ways:

  • It allows you the freedom to take out a higher loan amount
  • It shows the lender that you can save money;

Saving money for a deposit can take some time and you have to wait until you save up a large amount. So another, more convenient, alternative to get a car loan with bad credit is to consider if there is someone to co-sign the loan with you.

The co-signer should be a person who has a better credit score than you and is able to provide the loan amount to the lender if you fail to make repayments. By opting for this you are also in a better position to bargain for better interest rates on your car loan.

If you have a permanent residency and income, you can get access to the better car loan offers an more in accordance with your needs, despite your bad credit score. For this, you need to provide more personal details, and sometimes need to settle for slightly higher interest rates.

The benefit of getting car loans and on-time repayment is that it improves your credit score, and opens up your chances of easy approval for your next loan.

Sometimes it may be that no matter how hard you try, you fail to get a car loan because of bad credit. In such situations, you should try ways in which you can improve your credit score.

Read also: Knowing About Used Car Loan For Repairing Bad Credit

Applying for Auto Loans

In case you are now facing debt issues and are having difficulty getting a loan due to your bad credit score, you shouldn’t get disappointed since this is for sure not going to be the end of the world.

And furthermore, you shouldn’t think you are the only one who has such a problem but you can actually find plenty of people who are having bad credit scores as you do.

Furthermore, these types of consumers form a significant amount associated with the financing market, so expert loan companies do not want to disregard this vast majority if they really choose to stay alive in the financing business.

You will find loan companies who may have created financing plans specifically for consumers with bad credit. In the same manner, there are plenty of loan companies that provide auto loans to consumers with bad credit.

All you have to do is just do your research to get these loan companies. Once you get in touch with any of those companies, you are not going to have your bad credit to stop you from getting an auto loan of your choice.

Auto loans for people with bad credit

For people with bad credit to apply for auto loans, normally the borrower needs to pay some money upfront and the balance amount of money will be pay by the loan company. In many instances, the ratio between upfront payment and loan balances will be 20: 80.

This is going to be 20% from the price of the vehicle is provided by the borrower as advance payment coming from his personal savings and 80% of the price of the vehicle is provided by the loan company as loan.

For an auto loan, the vehicle bought will be used as the security from the loan provided by the loan companies. As a result, in the event you fall behind with regard to making payments, loan companies have the right to take away your vehicle.

As a consumer, you may have doubts on your mind as you may think since auto loans are as well offered to consumers who have bad credit, then what for a consumer need to keep his good credit rating for?

If you have such a question, you should know that actually the difference between bad and good credit will lie in the terms and conditions that a loan is offered. If a consumer is keeping up with good credit, that consumer may enjoy a lower interest rate when getting an auto loan since the loan companies know their money is rather secured to loan to these types of consumers.

In contrast, the loan companies are willing to lend out money to consumers who have bad credit is because they will impose higher interest rates on these types of consumers due to their risk of non-repayment are higher. If you are having bad credit at the moment, by getting an auto loan it can also provide you a chance to repair your credit score if you managed to make your payment on time each month.

Criteria for auto loans with bad credit

The criteria for consumers with bad credit to qualify for getting auto loans are as below:

  • A consumer needs to have a full-time employment.
  • A consumer age must be at least 18 years and above.
  • A consumer been staying at the existing address for more than one year.
  • A consumer is working in his/her existing job for more than one year.
  • A consumer needs to has a savings account where he/she makes regular payments.

As long as you meet all the above criteria, you are having a high chance to get your application to approve when you are applying for an auto loan.

Guaranteed Auto Loans Regardless Of Bad Credit History

With the availability of guaranteed auto loans, people no longer have to worry about getting rejected why apply for such loans with bad credit. You can now find a lot of bad credit auto loan companies that are dedicated to the sub-prime market and can guarantee your car loan in a short time.

We receive a large number of questions regarding bad credit auto loans for people who wish to apply for such loans but unfortunately get rejected due to their bad credit records. You can now check on the questions and tips that will enable you to get your deserve guaranteed loan.

Do I need to pay down payment for guaranteed auto loans?

There are a few secondary market auto lenders who willing to loan for bad credit borrowers but require borrowers to pay a minimum of 10% down payment. However, there are also a lot of lenders who don’t request for any down payment. This actually depends on which bad credit auto loan lender you choose for getting the loan.

Will repossessions and/or bankruptcies on my credit history affecting my auto loan application?

You need to do your homework and choose the bad credit auto loan company that is dedicated to the sub-prime market and didn’t care very much about your credit score when come to approve your loan application. You will get your guaranteed auto loan if you happen to find the right lender.

How can I get the right lender who is dedicated to bad credit auto loans in order to get the best deal?

You can find a lot of bad credit auto loan lenders in the market. You will find the tips below can help you to choose the right auto loan.

Does the loan company own the dealership and also have got a partnership with an auto dealership?

This can be a crucial question as bad credit loan companies will attempt to hit borrowers on both ends.

You will expect to pay higher interest rates with bad credit. If you think you are overcharged for the vehicle you purchase, you should seek advice from loan consultants to identify whether you been to become a victim of the unethical bad credit auto financing lenders who are taking advantage of you during your tough time.

You do not deserve to have this since you are able to get from other sub-prime lenders who are out there ready to offer you great auto loans with low interest rates. This can be a good way for your bad credit repair.

Will the lender or dealership restrict you to certain vehicle selection only?

You are going to find out if you are going through an ethical lender. In case of loan companies only allow you to select for certain vehicles, this may due to either the vehicles have much lower value or they don’t keep their value, the loan company can make money on both ends and result in less risk to them.

Choose the Right Lender For Auto Loans

As a result, in case you wish to get a guaranteed auto loan, then you are better to choose a secondary sub-prime loan company that is going to fulfill your needs.

Keep in mind that when you apply to a loan company that connects with the prime market and gets refuse, this is going to add very recent negative points to your credit report. Therefore, you are better to go for sub-prime loan companies since you are able to find many reliable loan companies as well.

Read also: Choosing the Right Car Finance Option to Suit You

Warren Paine

Warren is the senior mortgage loan officer who has worked in mortgages and loan industry since 1995. He study in Harvard and major in Finance with a Bsc. Honor Degree. He possesses a Paralegal Certificate as well.

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