How Do You Get A Car Loan With Bad Credit?
Your current credit score is the key to being able to make major purchases, such as a car. Banks and other traditional lending companies are much more selective about who they extend credit to. If you have recently lost a job, gone through a foreclosure or bankruptcy, it will be difficult to find someone to finance a car for you. Even a few late or missed installment payments on your credit report will make it hard to secure financing. Here are a couple of options to get the money you need for a new car.
High Risk Loan Companies
There are some lending agencies that specialize in giving loans to people with poor or damaged credit. These companies are called high risk because they assume that they may also have difficulty getting repayment of the loan from some individuals. They offset this risk by charging the highest interest rates possible. This means that you will pay the company much more for the use of its money than a traditional loan company or bank. If you're in desperate need of a car and can pay off these high risk loans quickly, this might be a valid option for you.
This can be a less expensive option for you, if you have a job and can make monthly payments on time. Some auto dealers created their own finance division to help consumers with problem credit to purchase a car. Some of these dealers will let you buy a car with little or no down payment and proof of income from a job.
Also known as buy here/pay here auto dealers, you work with the auto dealer directly to finance the car instead of a separate lending agency. You'll send your payment to the dealer and any problems you have making the payment, you'll work out directly with that dealer.
One of the ways this type of auto dealer minimizes their risk is to charge a higher interest rate. It won't be as high as the high risk loan companies, but will be higher than a traditional bank. Some dealers prefer to charge a lower interest rate but require a higher down payment. If you have the cash to spend on a higher down payment, choose the dealer with the lower interest rate to make your monthly payments smaller.
If you've got problem credit, working with one of these auto dealers can improve your credit rating. Buy a car from them and make the payments on time and they will update your credit rating. Their finance people are often flexible in the terms, letting you pay weekly or bi-weekly, if that works better for your finances.
If you are struggling with bad credit, but need reliable transportation to get you to your job and back home, these dealerships may be your best way to buy that next car.