If you have a bad credit history, you may worry about getting an auto loan to finance the purchase of your new vehicle. You are not alone. Over 68 million American Adults, nearly a third of the population, have a bad credit score. Buying a car with bad credit is possible. Sometimes you may have to spend a bit more to borrow for your new asset. However, with proper research and planning, you can get a bad credit auto loan option that works for you. Here are five tips to have your auto loan approval for bad credit.
1. Find Out Your Credit Score (Improve it if you Can)
The first step to getting your auto loan approval with bad credit is to check your credit scores. There are many free credit score checkers available online. It is crucial to find out this figure as most lenders tend to have minimum credit score requirements. You may try to improve your credit score by going through your credit history and identifying errors in the report. You may dispute the errors and enjoy a higher rating.
You can also start paying your bills and credit card payments on time for a few months. You can put your quest for a new car on hold for a few months.
2. Save for a Larger Down payment
You may try to convince auto lenders to approve your bad credit car loan by offering a larger cash deposit. Industry experts estimate a 20% down payment is standard for new car loans. With bad credit history, you may need to raise a higher amount. The larger, the better. It may help lower your loan-to-value ratio, helping you save on total interest costs.
3. Create a Budget and Stick To It
You may need to figure out how much you can afford each month to pay up for your car. Reflect on your monthly spending for the previous six months. Note down your recurrent expenditures. Determine how much you may save for your down payment. When you minus the savings and expenses, you may get a rough figure of what you can afford to spend on the auto loan. This way, you lower the chances of having a repayment that will strain your finances.
4. If Possible, Get Yourself a Co-Signer
A co-signer is an individual with a good credit rating that the lender will enlist to your loan. They are responsible for ensuring you pay for your car loan. The co-signer may get penalized if you default on the payments. The co-signing may significantly improve your chances for an auto loan approval for bad credit. Besides, you may also enjoy lower interest rates.
5. Flexible Low-cost car Options
The average price of a new car in the US is $35,309. Used cars present a cheaper option to fill in your vehicle needs as you sort out your bad credit. Recent research shows that the most frequently searched vehicle price range is $5,000 or less. The less the amount you need to borrow, the less you will pay in interest.
Bonus Tip: Look into Dealer Financing
Most used car dealerships have a variety of payment options with flexible repayment plans. Buy here pay here car loans are popular among buyers with a low credit score. The auto dealer is still the financier in this model. You get guaranteed financing and auto loan approval for bad credit.
Do you wish to discuss your loan options with a trusted used car dealership in Indianapolis? Head over to Auto Sales and Service today.
