Financing A Car or Truck
When you have bad credit, financing can be an issue and car financing is no different. There are still ways to get the financing that you need. Let’s take a look at a few of them and get you that car or truck that you need.
1. Check Your Credit Report
First, if you have been denied an auto loan, what you need to do is check your credit report. If you do not check your credit, you have no idea why you actually got denied.
Look for incorrect information and if you find it, dispute it. If this was the reason that you got denied, it will take about two months to get the information removed from your report. You will need to send a dispute letter to the credit bureau and they have 30 days to investigate. If the information can not be proven, it must be removed.
Once you get the negative information removed, you can then reapply for financing and hopefully get an approval.
If all of your information is correct but you just have a low score, you can start working on it to get a better score. Pay your bills on time and start paying down those credit card balances. If you have collections, negotiate settlements and make sure that you get it in writing that the creditor will remove it from your report.
Working on your score will not get you a car immediately but if you can afford to wait 3 to 6 months, you may be able to qualify for a loan at a later time.
2. Get Someone To Cosign
A cosigner can help you get a car by guaranteeing the loan with their good credit. You are basically piggy backing off of their good credit score. Asking someone to cosign for you is a very bug deal though. You are asking them to trust you to pay your vehicle monthly installments on time for the length of the loan. If you default on a loan, they will come after them for the money.
Because of the high level of trust involved in cosigning, most cosigners will be relatives. You can ask a friend to cosign for you but that is a lot to ask of someone.
The good thing about using a cosigner is that you can qualify for a loan with a reasonable interest rate. In addition, once you start paying on the loan, you will build your credit. This should allow you to refinance the loan in 6 months time, 12 at the most, and then you can remove the cosigner.
3. Put More Money Down
Auto loans are secured loans which means that if you default on a loan, a lender can repossess your vehicle and sell it. They can then use the proceeds of the sale towards what you owe. If you owe more than the vehicle is worth, the loan becomes more risky for the lender because they can not recoup all of their money should you default.
Putting more money down can lessen the risk to a lender because you will be covering all or at least a portion of the initial depreciation.
Generally, the more money that you put down the better your odds of approval are and the lower your interest rate will be. If you have been denied for a loan, shoot for putting 20 percent down. On a 10000 dollar loan, that is 2000 dollars, a lot of money but achievable. This might mean saving up the money or choosing a cheaper vehicle.
4. Buy Here Pay Here
If all else fails, you can go to a buy here, pay here lot. There are a lot of down sides to these lots but sometimes you have to do what you have to do.
One downside is that you will probably pay more for the vehicle than it might be worth. They will have a limited selection of vehicles and your bad credit gives you limited negotiating ability.
In addition, you will pay a high interest rate. In some ways this is justifiable because of the bad credit but just make sure the rate is reasonable.
Finally, these lots will often be much stricter with repossession. They may not give you as long of a leash when it comes to making your payments on time. Just a few days late and you could be facing repossession.
On the good side of things, these type of auto lots are easier to get approved on. They are in many ways as easy to qualify for as payday loans, if you have a down payment and a source of income, you can get approved.
5. Buy A Cheap Cash Car
If all else fails, you may need to just buy a cheap cash car. It may not last long and it won’t have all the features that you really want but it will get you from point A to point B.
But how much is a cash car going to cost you? Believe it or not, you still can find a car out there for under 1000 dollars if you put some effort into it. If you do not have that much money, a 1000 dollar loan is not too hard to get.
The best source of a cheap car or truck is Craigslist. Just be careful and only buy local. Also make sure that they have a clean title in hand.
Another great source of cheap vehicles is government auctions. Used police and city fleet vehicles are always being disposed of. These vehicles will usually be high mileage and have high running hours but they are generally well maintained by the city.
There are a lot of ways to get a vehicle, even with bad credit. You might have to make some sacrifices but the important thing is that you have the transportation that you need to take care of yourself and your family.