Posted Thursday, April 15, 2021
About 16% of Americans have bad credit. That means almost one out of every five people you see on the street struggles with their credit scores!
This makes getting a new car especially difficult since bad credit prevents you from getting a loan. Are there ways you can get a car loan even with subpar credit?
Luckily, yes. Bad credit car loans are widely available, and you can get them in a variety of ways.
This article will examine bad credit car loans and how you can secure them in 2021. Read on to find out more!
First, let’s discuss what determines good or bad credit.
Different banks and lenders have different criteria. When you apply for a loan, most credit scores are judged by the following:
This is the most well-known determinant for good credit. Missed payments have detrimental effects on your credit score.
This is because lenders need assurance that you can pay back your debt. Credit reports often show your payment history, giving lenders insight into your ability to pay.
Lenders also look at your credit utilization ratio. This is the total revolving credit you’re currently using divided by all available revolving credits.
This shows how much credit you’re using and how responsible you are with your supply. Lenders tend to avoid those with higher ratios.
Lenders will also look at how many credit accounts you’ve recently opened. If you’re someone who constantly opens new accounts, this might lower your credit score.
The diversity of your credit portfolio can also affect your credit score. Different types of credit indicate how well you manage your own finances and debts.
Based on all those criteria, you might end up with a less-than-ideal credit score. Luckily for you, there are plenty of bad credit car loan lenders and bad credit auto dealers to choose from, such as Autos4Less.
However, it’s important to note that your financing terms might be different than a typical lender. For example, your interest rates will most likely be higher if you’re getting a loan with bad credit.
This is because lenders believe they’re taking on more of a risk with you. As such, your monthly payments will probably be higher than normal.
Let’s take a look at a few steps to secure a bad credit loan while keeping costs as low as possible.
Bad credit car finance doesn’t have to be extremely expensive. Here are steps you can take to lower your bad credit loan costs as much as possible:
The first step to securing a bad credit loan is obtaining a copy of your credit report. This gives you an idea of where your credit score is and areas you can improve your spending.
If you aren’t immediately buying a car, you can take preemptive steps to improve your credit score. This includes paying your bills on time, taking care of any outstanding debts, and getting a credit report audit to eliminate errors.
The next key step to getting a bad credit car loan is finding the right lenders. Looking up “bad credit car loans near me” might get you a few quality results.
Some of these lenders might offer slightly higher interest rates, but they’ll help you get a loan in a pinch. Be on the lookout for bad credit auto dealers as well, like the aforementioned Autos4Less.
Some dealers are willing to sell cars for bad credit. Doing a little research comes a long way in securing a quality loan.
Once you’ve settled on a lender and bad credit car dealers, it’s time to shell out some cash. The last thing you want is to fall short on your down payment.
Putting down more for your initial down payment might benefit you on future payments. Showing up to a lender or bad credit car dealership with a decent down payment is therefore important.
It also shows them that you’re a reliable borrower despite your credit. It’s all about plans and good intentions here.
Just because a lender is willing to take you on doesn’t mean you can be careless with your loans. Settle on a monthly payment that you know you can afford.
Do some research to find your interest rate limits, so you never fall behind on your car loan payments.
If you don’t have the time to improve your credit and need a car now, there are plenty of options to choose from. Let’s look at a few here:
A cosigner with good credit can apply for a loan with you to split the risk for the lender. This drastically improves your chances of securing a loan.
However, know that failing a payment impacts both you and your cosigner’s scores.
These loans give rejected lenders with bad credit a second chance. They’re easier to get approved than most other loans but come with a caveat. Autos4Less is a reliable site that offers second chance loans.
Most second-chance loans have higher interest rates and fees. This is concurrent with the risk lenders take by taking on clients with bad credit history.
Another popular option is finding a credit union to financing your car. They’re known for working with bad credit borrowers and offer decent rates.
Checking with a credit union and joining one before finding a car might even get you a pre-approval. This makes your car search much less stressful, knowing you have the money to make a purchase.
If you’ve been searching “bad credit car loans near me,” it’s important to know what affects your chances of securing a loan. Use this article to understand how to get bad credit car loans today.
Need bad credit used cars? Want to buy a used car with bad credit? Check out our inventory today and contact us for more information!