Our apologies if you’re expecting to see a step-by-step guide in taking out a bad-credit auto loan. We believe it’s more important to give you the necessary pointers that shouldn’t slip your mind when finding financing for your car with a bad credit. So here we go:
1. Claim your free copy.
The law says that you can get a FREE copy of your credit report every 12 months from the three major credit bureaus in the country—Experian, TransUnion and Equifax—through AnnualCreditReport.com. Again, this is free so there should be no excuse for you not to check up on your credit. This is the first thing you should do before taking out a bad-credit auto loan.
You should make sure that your report does not contain any inaccuracy. If you find errors, report about them as soon as possible. You need to dispute these errors for they can unnecessarily lower your credit score.
2. Take the shorter route to the finish line.
What do we mean by this? It is not surprising if you are one of the many consumers who are attracted to the low monthly payments offered in long-term car loans. That’s the trend. However, repaying for a longer period may not be the best idea for a bad credit holder like you. Longer loan terms may indeed reduce your monthly payment but they can kick up your interest costs.
By comparison, the monthly payments in shorter loan terms appear higher. This is only because you have fewer months to make your payments. But if you look at the total costs, you would find out that you are paying just enough.
Keep in mind that you will be charged a higher interest rate because of your credit. Avoid making your auto loan more costly by choosing not to stay too long in a car loan agreement.
3. Carry the load with someone.
The good thing about financing your car with bad credit is you don’t have to do it alone. You can ask someone to help you. In fact, doing so can even expedite your loan application.
You see, cosigners make your application look better to lenders. A cosigner can be anyone you trust who has a better credit than yours and is willing to share in your responsibility as the primary borrower. His or her credit can most of the time give lenders a guarantee that you will pay up on time.
4. Watch out for scams.
There’s something you should understand as a borrower with bad credit looking to finance a car: Rip-off artists and unscrupulous characters “like” you. What does this mean? Lenders and dealers and fake ones are most likely to take advantage of your situation. They usually perceive borrowers like you as desperate and in a rush to take out a loan. They then think that it’ll be easier for them to lure you into their traps. Be familiar of their schemes and read on how to avoid them.
Why not fix your credit first?
Getting a car loan with bad credit—and getting a good one—is not impossible. However, financing your car with a good credit is still better for both your credit and finances. If the car purchase is not urgent, we suggest delaying it so you can spend some time fixing your credit first. By the time you have a better credit, there’s no doubt you can get a better deal than what you can get now.