Are you one of the many consumers today who are challenged with a low credit rating? Do you despair of ever being able to obtain green light auto credit for the car you need to get to work and to run daily errands?
A car is a necessity. But bad credit is a serious issue if you are trying to get an auto loan to finance a car purchase. Here are some ways on how you can increase your chances of getting approved for an auto loan even if you have damaged credit.
1) Meet eligibility requirements.
You need to realize that your credit rating isn’t the only thing lenders care about when they review an application. They obviously know that you have some challenges with your credit report, or you wouldn’t have sought them out for a car loan.
Auto lenders also look at your job and income. They want to make sure you are at least earning enough to make timely payments and have a stable source of income. You can also ask someone to sign the loan with you to minimize your being a high-risk borrower.
There are several lenders today, including banks, that are willing to provide loans for borrowers like you. These lenders approve hundreds of applications everyday despite the credit situation of applicants. Don’t be afraid of being turned down for a loan because of your credit rating.
2) Present a financial plan to lenders.
Know your credit score and present to the lender how you plan to improve your credit with a new car loan. Lenders and dealers will like the fact that you know where you’re going and how you’re going to get there. If having a car enables you to pick up a second job, let them know.
But there are also bad credit auto lenders that are willing to work out a financial plan with you. Here at Prescott Financial, we want to help people not miss a payment and rebuild their credit. We do this by creating a flexible payment scheme which suits their credit situation and income.
3) Put some money down.
The down payment is never a small amount of money, especially for people with low income or poor credit. But putting some money down for a car increases your chances of getting approved for a car loan. The ideal down payment has always been 20% of the purchase price. But most buyers today make only around 10% to 11% on average, Edmunds says.
There’s no problem with that, though. A down payment tells lenders that you are still capable to repay a car loan even if you have poor credit. It also makes monthly payments easier, believe it or not. The one thing you should never do, though, is skip the down payment or resort to zero-down auto loan programs which do not really help.
4) Be realistic when you choose a car.
One of the many reasons why a borrower with bad credit does not get an auto loan is an expensive vehicle. We at Prescott Financial encourage our customers to choose a car that doesn’t go beyond their means. In this way, it’ll be easier for you to pay off the loan on time and improve your credit.
Choosing a luxury or sports car when you have bad credit will also make your credit application less credible. And if ever a lender agrees to finance your car, you might end up upside down on your auto loan or in a situation where you owe more than your car’s present value.
5) Choose a trustworthy lender.
Just because a lot of lenders these days can provide auto financing for people with bad credit doesn’t mean you can choose anyone. Don’t be too desperate to forget about screening lenders. Keep in mind that unscrupulous lenders and dealers continue to exist in the market.
Make sure that the lender you’ll be working with reports your payment behavior to the credit bureaus. Otherwise, nothing will happen to your credit rating even if you always pay on time. Look for lenders that are not in the business only to squeeze every dime out of the customers. Trustworthy lenders want to help.