It may be the case that you’ve sat around wondering if you could be approved for an auto loan despite your bad credit. In the American way of life, a car is oftentimes a necessity. Even since the great recession from a few years back, both poor economic conditions and new legislation has make it more difficult to get approved for any kind of loan.
If it is the case that you have bad credit, you should probably first ask yourself if a loan is even worth it. But if you have come to the conclusion that your finances can handle an auto loan, despite your bad credit, then you should know that not all hope is lost.
More Americans with bad credit are being approved for car loans. The number of subprime (low credit score) auto loans has risen to a level that is concerning to analysts. But at the same time, the number of 30-day delinquencies has also fallen.
This could mean one of two things. It could be the case that lenders are picking and choosing individuals who have bad credit, but also may be more likely to pay off the loan despite having bad credit.
It might also be the case that more people with bad credit are being more responsible and getting their finances in order. Whatever the case, the report shows that it’s not impossible for you to get an auto loan if you have bad credit.
Taking the right steps
When looking for an auto loan with bad credit, you should immediately put out of your mind getting a loan from sleazy companies that specifically appeal to those with bad credit. We’ve all seen the advertisements from companies saying “bad credit? No problem.” These may seem appealing in your situation, but you should avoid most of these companies at all cost.
There is simply no good reason to take a loan from these types of companies. Payday loans and the sort have been caught committing acts of fraud continuously. So much, in fact, that the government is having trouble keeping up with continuously deceptive and sneaky maneuvers by the payday loan industry.
Now that you’ve put those kinds of loans out of your head, you’re ready to approach the auto loan industry with your bad credit. Here are a few steps you should take, in addition to a few pointers.
- Check your credit score so you know what you’re working with. Websites like CreditKarma offer instant access to your free credit reports and scores from TransUnion and Equifax.
- Before applying for any auto loans, decide on what kind of vehicle to get. Although you’re more likely to be approved for an auto loan if you’re considering a newer car, it may be a better idea to stick with a cheaper used car.
- When selecting a vehicle, be realistic. Don’t get any added bells and whistles, don’t go for luxury and don’t go overboard. Remember, you have bad credit. Not only are you using this loan for a car, you’re also using it to build your future credit score.
- Explore your options before applying for a loan. Talk with as many reputable institutions as you can and find the best deal. If you’re uncertain about your chances of being approved, apply for a few different auto loans at the same time. Oftentimes, credit agencies will not hold it against you if you apply for multiple loans in a short period of time. But be warned, continually applying for batches of loans will eventually impact your credit score negatively.
- As you’re getting approved, or after you’ve been approved, you still aren’t done. Be careful of tricky games by some car dealerships. It could be better to get a loan from a financial institution than from a dealership directly. Do not drive the vehicle off of the lot before signing all of the required paperwork, including the loan. Sometimes people find out that their interest rate has been increased once they come back to finalize the deal.
- Finally, don’t let car dealerships pressure you into added packages. Know what you want before going in and stick with your plan.
Best of luck!
