There is no need to worry if you have bad credit but need to buy an auto. You might be struggling to get a loan with this credit, but then there are ways and means to get an auto loan. Here are a few tips as listed by the experts.
1.Try Improving your Credit Score
A car can be a necessity but not an emergency. This means you can take some time and work towards improving your credit score. This three-digit number is used for evaluation by the lender. A high number can help you get an auto loan with favorable terms and conditions and low-interest rates.
A credit score is calculated based on history, this includes repayments, previous loans, and other EMI’s.
Checking your credit report can give you a clear picture of the credit score. You can also ensure that this is free of any errors.
To ensure you get a good credit score, make sure you do not opt for any new credits or loans. One way to improve the credit score is to consolidate the existing loans.
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Arrange for a Large Downpayment
If you are ready to pay a large downpayment there are better chances of the auto loan being approved sans any major problems. This means, getting a loan with bad credit can work out for you. You find that most of the lenders approve only 80% of the price of the vehicle. This large downpayment tends to reduce the loan-to-value (LTV) ratio reducing the risk of the lender.
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Bringing a Co-signer on-board
Generally, there is no requirement for a co-signor for an auto loan. This can probably work if you have bad credit. A person who is willing to take the loan along with you is the co-signer. You can ask your friends, relatives, or even parents to accompany you when you apply for an auto loan with bad credit.
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Skip the Frills
Decide on a car that is ‘no-nonsense’, without any frills. With bad credit, there are fewer chances of you being approved for a large amount of the loan. Going only for the essentials can help you bring down the amount of the loan. Keep the ‘dream car’ pending.
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Explore Fiancing by the Dealer
Leading lenders and auto dealers have some sort of tie-ups. This makes getting auto-loans easier. One negative of this is that the dealer getting involved with the loan process might make the loan more costly. The loan can be secured with ease as the criteria for eligibility are not stringent.
Before deciding on any dealer or lender, ensure you conduct thorough research and ask around. You can compare the different rates of interest, and also negotiate the terms and conditions.
Building the Credit Score
You can improve your poor credit score by taking this bad credit auto loan. Set up the automated payments so that you do not miss out on any payments. The EMI is deducted automatically. With these payments made on a regular basis, you find an improvement in the credit score.
