Getting a car loan with bad credit might be a little tough but is not altogether impossible. Conducting thorough research for this car loan is the most appropriate aspect. Listed below are a few things you need to be aware of before applying for a car loan with bad credit.
- Knowledge of the Credit Score:
Before you start researching for a car loan, it is important to have knowledge of your credit score. According to the scoring system of FICO, any score that is less than 580 is considered to be poor. You can try addressing a few of the factors that are leading to the bad credit score and rectify these. Repairing the credit score before you shop for a car loan, works in the positive.
- Saving for a Down Payment:
It is easier to be approved for a car loan with a bad credit score if you are able to make a down payment. Plan to collect enough funds for the payment. This is on a monthly basis. This means you cannot plan on a car today and apply for the loan tomorrow.
- Research and more research:
Conducting thorough research gives you a clear picture of the ongoing interest rates for car loans. This can also help you in preparing for any type of negotiation when you take a loan. A bad credit score attracts high rates of interest.
- Prequalifying with Lenders:
With prequalification, you get to know whether you qualify with the different lenders or no. This can save time on different applications and, also avoid some hard credit checks. You need to be aware that multiple credit checks have a negative impact on the credit score.
How much you need to put down with Bad Credit.
If you have poor credit, bad credit, or even no credit you need to make arrangements for a down payment of a minimum of 10% or even $1000 for the car, whichever amount works lower. You might have to pay a higher amount of down payment if you choose a high-risk loan for the car.
Banks give Loans with Bad Credit:
Banks can offer you a loan with bad credit but this might be only a secured loan if the problem is bad credit.
Some Tips to Improve Credit Score:
Instead, of facing multiple problems with a bad credit score, it is advisable to take some steps to improve this score.
- a) Make sure your bills are paid on-time.
- b) Get credit for making cell phone and utility payments on time.
- c) Keep the balances low on credit cards and pay off all the debts.
- d) Applying for new credit cards is based on need.
- e) Do not close the credit cards, that are unused.
- f) Applying for new credit attracts inquiries.
- g) Make sure you dispute any discrepancies in the credit reports.
Getting a car loan with a good credit history is anytime beneficial as compared to getting a loan with bad credit.
