There are few things more frustrating than needing a car but having trouble qualifying for a loan due to a bad credit score. And yet, this problem has become an all-too-common one for responsible, upstanding people everywhere.
Currently, the financial world places a huge emphasis on a person's credit score when deciding whether to extend them a loan. While this has been the case for at least a few decades, recent financial woes such as bank bailouts and "underwater" homes has made lenders more skittish than ever.
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If you have extremely bad credit but need an auto loan, the following information can help you increase your chances of getting a good deal on an auto loan.
What Auto Loan Lenders Look At (Hint: It's Not Just Your Credit Score)
Even without being an auto loan lender yourself, it is not very difficult to imagine what they are looking for when deciding whom they will loan money to: they want someone who is going to pay back any loan they make. So, how does this translate to what a lender looks for when considering a new borrower? There are a number of factors that vary from lender to lender, but here are the big ones:
a. your credit score
b. your employment history
c. your age
d. your income
e. how much you are putting down on your auto loan as a down payment
What If You Have A Low Credit Score?
So, given that the borrower's credit score looms large in the considerations of most auto lenders, how can you possibly get an auto loan if you have bad credit - or even extremely bad credit? There are two facts about lenders that can help:
a. some lenders look at your overall credit history, not just your current score. This minimizes the effect of some of the recent glitches on your loan.
b. there are lenders who specialize in lending to bad credit individuals; they have developed ways to judge the credit-worthiness of borrowers, even when their credit score is bad.
5 Steps To Getting Auto Loans For Extremely Bad Credit Individuals
If you are looking for an auto loan but have very bad credit, these tips will help you get the best-possible deal:
1. Run your credit report: Run your report with all three of the top bureaus (TransUnion, Equifax and Experian).
2. Fix any glitches in your credit report: Read through each report carefully and look for any mistakes or glitches. Contact each bureau directly to fix the glitches.
3. Choose a reasonably-priced car: You are more likely to get approved for a loan if you have a lower-priced car. That is because the amount you will need to borrow will be less.
4. Save up as much as possible for a down payment: Similar to #3, the more you save for your down payment, the less you will have to borrow and the better your chance of getting approved at a low rate.
5. Apply to at least 5-7 bad credit auto loan lenders: Now, do some online research and come up with a list of at least 5 bad credit lenders. The more you apply to, the better your chances of getting that low-rate loan you are looking for.
These 5 tips can help you get qualified for the best-possible deal on your new loan.
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