If you have a bad credit score, shopping for a new car can be worrisome. Unless you have the cash to purchase a car in full, you’ll need a loan. With bad credit, you can struggle to find a lender that’ll work with your credit score. And many bad credit auto loans come with unfavorable terms, high interest rates, and other disadvantages. But there are ways to get a decent auto loan that suits your budget, even with bad credit. You just need to search online to find auto loans and lenders that work for bad credit.
Don’t give up on the dream of owning a new car just because you have bad credit. You can find an auto loan that works for your credit. But in order to find the latest loans and offers, you’ll need to search online.
If you have bad credit, the following are a few steps you can take to work towards getting an auto loan.
Check Your Credit Before Shopping
Before you begin looking for your next new car, you need to make sure that you check your credit score.
You need to know exactly what you’ll be working with when it comes to your credit. You can get your free credit report from any of the three credit bureaus, or you can use a free online tool like Credit Karma. Your score should show you where you stand with your credit, and if there are any accounts or outstanding issues.
Once you have your credit score and your credit report, you can take steps to address any problems or delinquent accounts. If there are areas you can work on – making late payments, being behind on a certain account, or consolidating some debt – take action. You may be able to improve your credit score a bit once you know where the problem areas are.
Put Aside Money for a Down Payment
If you don’t need a car urgently and have some flexibility in both your timeline and your budget, take some time to save money for a down payment. A down payment is the amount you’ll put towards your new car up front – and it can make a big difference when you’re trying to get a loan with bad credit.
The more money you can put down towards a new car, the more you’ll be able to save when it comes to your loan. You’ll be able to get lower monthly payments, get a better interest rate, and potentially shorten the term of your loan.
Your down payment gives your lender actual cash towards your purchase. And that’s a factor they’ll weigh considerably when determining how risky it is to give you a loan. If you have bad credit, a sizable down payment can offset some of your riskiness, making it a bit easier to get a loan. And it can make your loan more affordable for you as well.
Consider Getting a Cosigner
With a low credit score, you’re viewed as a risk by many lenders. However, if you have someone with good credit who’s willing to cosign your auto loan, lenders may be more willing to offer you financing.
Getting a cosigner with good credit will increase your chances of being approved for an auto loan – and your cosigner may even help you get a better interest rate. That’s because you and your cosigner will apply for the loan together. And should you fail to pay back your debt, your cosigner agrees to repay it for you.
This is less risky for the lender, which means it’s good news for you. You could potentially save thousands of dollars over the lifetime of your auto loan with a cosigner. However, you do need to make sure that you’ll be financially responsible if you get a cosigner. Both your credit and your cosigner’s credit will be affected – and if you miss payments or are late to make your payments, your cosigner’s credit score will fall.
Shop Around to Find a Lender
Lastly, it’s important that you shop around before choosing a lender. While there are many ways to get an auto loan, having bad credit means you need to carefully consider and compare certain factors.
You need to search online to find lenders that will offer auto loans for people with bad credit. Then, you should compare the financing options available from each lender. Make sure you take a close look at:
- The interest rate.
- If a down payment is required.
- The loan term or repayment period.
- If there are any special requirements, like a minimum monthly income.
- The lender’s reputation.
You’ll find there are many online lenders who can help you, even with bad credit. The following are some of the best auto loan options available for those with less-than-perfect credit.
Auto Credit Express
It’s easy to qualify for an auto loan with Auto Credit Express. You can fill out a pre-qualification form and find out if you’ll qualify for financing within 30 seconds. This lender specializes in bad credit and no credit, and interest rates start as low as 3.99 percent. With the ability to work with more than 1,200 dealerships across the country, you’ll be able to find the financing you need.
LightStream
LightStream will work with less-than-ideal credit, offering loans to those with minimum credit scores of 660. Interest rates range from as low as 3.49 percent to 11.89 percent APR, which is relatively low for bad credit loans. You can secure an auto loan in any amount from $5,000 to $100,000, if you’re able to qualify.
Car.Loan.com
With a free, no-obligation application and same-day approval, you can find out if you qualify for an auto loan with Car.Loan.com in no time. This lender specializes in auto loans for all kinds of credit issues, including bad credit, bankruptcy, and first-time buyers. It takes just three minutes to complete the application and secure a loan.
Capital One
With no minimum credit score and the option to pre-qualify without a hard credit inquiry, Capital One is a great choice for those with bad credit. Interest rates even start as low as 2.99 percent. You can apply with a co-applicant or cosigner, and you can even choose a loan term longer than 60 months if needed.
Take the time to search online for an auto loan lender. Your credit score doesn’t have to hold you back, if you do your research and compare lenders. You may be able to find a lender that offers terms and repayment options that work for you and your finances.