It’s a fact that those of us with a poor credit history will find it difficult to secure an auto loan. And even if we were to attain financing, the interest rates may be so high on the loan that we simply may not be able to afford it.
The high-interest rates are in place to cover the risk for the lending company, so although it seems unfair, it is actually understandable.
So how to attain a bad credit auto loan?
A lending company will decide to give you a loan or not – depending upon your credit record
This is then used in an algorithm to determine your credit rating which is then used to assess creditworthiness. Credit rating is there to measure the level of risk an individual poses to the potential lender.
The higher the credit rating we have then the higher the chance of the loan application being accepted, and with very competitive terms too. However, even with poor credit, it is possible to repair it, given time and knowledge. And it is worth spending time and gaining knowledge.
Not only will you be accepted for a bad credit auto loan, but the terms that come with it may be competitive. Here are the top 5 things that must be considered when trying to find a bad credit auto loan:
1. Look for the independent auto dealer. And also ensure they are well established with a good reputation. Chance are higher you will gain acceptance from the independent dealership as they tend to be involved more with lenders to bad credit situations.
2. Take along your pay stubs or wage slips as evidence of your income and job status. Also take with you proof of your residence address – utility bills, bank statements, and driver’s license.
3. By all means, take the time to review your own credit status. Get your hands on the free credit report – you can attain one free one every year from the credit reporting agencies. Have a look at it and ensure all the data is correct. Check it against your own records.
Very often credit reports are incorrect and thus could adversely affect your credit rating. If you find yours to be incorrect, contact the credit agency and ask for the application forms and details of how to correct it.
4. To avoid too many inquiries regarding your own credit history. Its fact that if too many inquiries are made in a short time span, your credit rating can become even worse.
5. Do not spend more than you can afford to pay back each month. It’s tempting I know, but with an already poor credit rating, you do not want it worse! Stick within your budget, at least for now, until you can afford something better at a later date.
If you thought it to be very difficult to attain a bad credit auto loan, it’s not. Just ensure you have done your preparations – do some research and cover your bases. The more you are aware of and prepared for, the easier it actually is!