If you are looking for a car or truck loan with a low credit score, you already know that you are looking at an uphill battle. Still, you need a vehicle and you need to do what you need to do. We understand. Lucky for you, we can help.
Let’s get you a loan quote and then we can give you some additional tips on how to get approved or to better your loan terms. Even with bad credit, a lender in the loan network may be able to give you a cash installment loan and a cash loan means that you are a cash buyer which gives you a lot of negotiating strength.
Qualifying For A Loan With Poor Credit
The trick to getting car loans for people with bad credit is eliminating risk for the lender. You might have the best intentions but all that they see is a credit score. There are several ways that you can cut the risk for the lender and increase your odds of approval.
Big Down Payments
The bigger your down payment, the better your odds of approval will be. Look at it from a lenders perspective. As soon as you drive a vehicle off of the lot, it depreciates. If you owe more money on a car than it is worth, you are more likely to default on a loan if things go bad. Try to bring enough money to the table so that you have positive equity from the get go. This can be hard to do but bring as much money as you possibly can and your odds of approval will increase. In addition. the more money that you put down, the lower your interest rate will be. 10 to 20 percent is a good down payment goal. So, if the car you want costs 10,000 dollars, try to put down at least 1000 dollars to 2000 dollars.
Choose The Right Vehicle
It is a fact that some vehicles will be easier to get approved for than others. If you are trying to get a loan with bad credit, that vehicle, in all likelihood, will be a low end new car. A new vehicle means reliability to a lender. It means that it is under warranty and will not break down in the next few years. Used vehicles are far riskier since they are or will soon be out of warranty. So, all things being equal, a new $20,000 car is easier to qualify for than a used $20,000 car.
Explain Your Bad Credit
Lenders may be able to look past a lot of things on your credit report if you can explain them. If something occurred that is not likely to happen again and it killed your credit, your lender might “cut you some slack”. This could be an illness or an unexpected layoff. There are many things that could have effected your credit that you can explain.
Get A Co-Signer
This can be a HUGE benefit to you. If you can find someone willing to co-sign your loan that has good credit, you will be in very good shape. Keep in mind though that you are asking a lot of your co-signer. If you were to default on your loan, they would be responsible for this debt. If it is a debt that they could not easily take on, it could ruin their credit.
Improving Your Credit Scores
If you really want to get yourself approved for a loan, you need to concentrate on improving those credit card scores. There are a lot of ways to do this and some of them can make big changes pretty quickly. Here is what you need to do.
First, Pull Your Credit Report
Go to a place like Credit Karma where you can pull your reports for free. As a bonus, they will monitor your credit for changes to guard against credit card fraud. The cost is free but you will be bombarded by advertisements while on the website. The cost is worth what you get though. Free credit reports and free credit monitoring.
Second, Dispute Wrong Information
If you believe something is wrong, you can dispute it. When you do, the credit bureau has 30 days to conduct n investigation. If the information is not proved correct before that time, it must be removed from your report. The process can take about two months to really get the information ff your report and get an updated score, so do this several months before you want to seek financing. Disputing negative information alone can easily raise your credit score to the next tier. Do that and your odds of getting a good auto loan dramatically improve.
Third, Pay Down Balances on Credit Cards
If your credit cards are maxed out, that is killing your credit scores. The ideal balance percentage for the best credit score is 30%. Your cards should have balances below that amount. If you can not get the cards that low, don’t worry, you can get improvements by lowering the balances even in slight amounts. Just taking your cards from a 90% balance to an 80% balance can get you 10 to 15 points improvement on your score.
So, if your balances are very high, you might be better off putting some of your deposit money onto your credit cards. This will improve your score and cut your monthly payments. If you go this route, note that it will take about two months for the lower balances to show on your report.
Fourth, Pay Your Bills On Time
Missed payments can be very detrimental to a credit score and could be the whole reason that your scores are in the low range. A single 30 day late strike can lower your score dramatically. To counter this you, of course, must start paying your bills on time. In as little as 6 months you can start seeing improvements on your score. You want that new car now, but if you can wait a bit, you will be rewarded with a better interest rate and a lower car payment.