A bad credit auto loan isn't impossible to find-- it just takes a little work! If your credit is a little dented and dinged, it doesn't have to shut you out of an auto loan. There are those companies that will overlook bad credit. Auto loan options for you if you have less than perfect credit include on-lot dealer financing, getting a co-signer, attempting to repair your credit before you look for a bad credit auto loan and accepting less than ideal terms for a bad credit auto loan.
Your best starting point - before you even start looking for a car - is to check your credit report yourself. A new law passed last year entitles you to get one free credit report from each of the major credit reporting agencies every 12 months. The law is being rolled out across the country in stages, but by the end of 2005, whatever state you live in, you'll be entitled to check your own credit history free once a year to find out if you have bad credit. Auto loan and finance companies will use the information in your credit history to determine whether or not to grant you a loan and on what terms, so it makes sense to check first and avoid being surprised.
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If you find errors in your credit report, or if a credit reporting agency is mistakenly reporting that you have bad credit, put off applying for an auto loan until you have a chance to clear up the mistake. If, on the other hand, your credit report legitimately lists problems, you can start looking for a bad credit auto loan through one of several different sources.
Because a bad credit auto loan carries more risk for the lender, it's difficult to find one with "competitive" interest rates. The best way to get a good interest rate - and begin repairing your bad credit is with a cosigned auto loan. By co-signing an auto loan for you, your co-signer takes responsibility for paying back your loan if you fail to make the payments. The interest rate is likely to be much better than you can get with any other bad credit auto loan - very close to the terms your co-signer would be offered. Just be sure to ask the lender to report the payment history in BOTH your name and that of your co-signer so that you can begin repairing or building your credit history.
If a co-signer isn't possible, or you prefer a loan in your own name, try to secure a bad credit auto loan on your own before going to the dealer. Your usual bank is your logical first choice. Make an appointment to speak with a loan officer at the bank where you usually do business, as they have an interest in continuing and extending their relationship with you. One possible option through a credit union, for instance, is to make arrangements for a bad credit auto loan that's tied to one of your other accounts as security.
The car dealer should be your last option for securing a bad credit auto loan. They have a vested interest in getting you into a car - but be aware that you'll pay premium prices for financing a bad credit auto loan through a dealership. If it's your only option, however, you may find that you can convert your high interest auto loan in the future if you're able to repair and improve your credit score.
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