How to Get Auto Loans with Any Type of Credit
Do you fear that bad or nonexistent credit might stop you from having access to an auto loan? Surprisingly, no matter what your credit score is, there may be ways to find financing for a new car.
As you probably expect, your credit score does play a vital role in getting an auto loan. If you have a bad score (typically 619 or lower), you may have limited loan choices. However, this does not mean that there aren’t options available to you. Although they may be more expensive, these options may be better than receiving no auto financing at all.
Once you’ve verified that your credit history and score are accurate, you’ll be ready to check your loan options.
Pay Bills on Time
If you have poor credit, auto lenders may assume that you struggle to make responsible and timely payments. When searching for an auto loan it is important to pay bills on time responsibly from the start of your search in order to showcase to lenders that you are able to pay your bills on time.
It may take time to demonstrate your ability to pay monthly bills, but that’s exactly what lenders need to see before they offer you a long-term loan.
In order to provide loans to “High-Risk Borrowers”, subprime lenders often double or triple the interest rate on a loan. To prove that the borrower can pay for the vehicle, the sub-prime lender may also require a down payment of at least 20%.
But if you’ve saved up a good chunk of cash, a subprime lender may still be willing to give you a loan (even with your poor credit).
Ask Someone to Co-Sign
If you have a trusted friend or family member who you can rely on to cover your auto loan payment, you may want to ask for their help.
While co-signing may be an awkward conversation to have, it can also be a relief for you and the lender. A co-signed loan may help you reduce your interest rate or the down payment on a car.
However, co-signing an auto loan may be a huge financial obligation to both parties. If the original borrower misses a payment, the co-signer’s credit rating will also be affected. If you’re looking to co-sign, do so at your own risk.
Apply with the Car Dealer
Car dealers may be willing to offer an auto loan to any buyer regardless of their credit score. In fact, most dealerships will give an auto loan to anyone – even someone with no credit history at all.
Dealerships profit greatly off the loans they give, which are likely at a much higher rate than the loans you might find elsewhere. Still, an auto loan through a car dealer may be a good option depending on your credit situation. It should never be your first choice, but dealer loans may be available if you need them.
