People in need of a new vehicle and looking for a loan can often get discouraged if they have a poor credit history. Though it is true that finding a car loan with bad credit is difficult, it is by no means impossible. There are many lenders out there who specialize in working with poor credit and who will be able to get you a car loan.
The key to success in this search is doing the necessary research prior to purchasing a vehicle. There are several factors that go into a lender’s evaluation of a loan application. Bad credit will not be the only factor considered while looking for a car loan. The following four strategies can help you find the loan you need.
Strategy 1: Take an Honest Look at Your Credit History
It is true that good credit will make getting a car loan or any loan really, much easier than poor credit. Understanding the reasons for your bad credit score will help you to not only get a loan, but improve your chances of finding loans in the future. You want to make your credit better however, it is not impossible to receive a car loan with bad credit.
History of purchases, payments and other financial elements will generally help determine the credit score of each individual. Chronic late payments, too many loans, and large amounts of credit card debt will all contribute to your ultimate credit score. Concentrate on making timely payments, consolidating debt through personal loans and seek help from a financial counselor in order to help improve your credit score over time.
Strategy 2: Employment and Income
Aside from your credit history, your current income and employment history will be the other major factor in determining your likelihood of qualifying for a car loan. With bad credit, you need other factors to help endear you to lenders. Sufficient income to ensure timely payments of your car loan and steady employment history are two factors that can make the likelihood of receiving your loan much greater.
Strategy 3: Using Lenders Who Work with Bad Credit
Most conventional lending institutions, such as banks and community credit unions, have very high standards in terms of credit ratings. Therefore, finding a car loan with bad credit from one of these lenders is difficult if not impossible. Therefore, you need to look towards alternative lending sources, such as online private lenders.
Private lenders who work through the internet generally specialize in granting loans to those with bad credit. They understand the particular strains of your situation and can work with you to find a solution.
Strategy 4: Co-Signers
If you still do not qualify for a car loan through private lenders, a last option is to find someone to co-sign your loan who has good credit. Only approach very close friends or family members about this option. Make sure that you can make the payments each month and that you have a backup plan should you fail to make your payments. Co-signers give lenders insurance in regards to your car loan repayment, but defaulting on a co-signed loan can mean ruining your co-signer’s credit as well.
Car Loans with Bad Credit
History teaches us many things. However, when it comes to loans, it is not the only indicator of success. Though credit problems in the past can limit your ability to find a suitable car loan, bad credit is not the end of the line. You can find a loan by using these four strategies.