Do you think bad or nonexistent credit might stop you from getting an auto loan? Surprisingly, no matter what your credit score is, there are ways to find financing for a new car. Getting an auto loan may not be as difficult as you thought.
As you probably expected, your credit score will play an important role in getting an auto loan. If you have a bad score (typically 619 or lower), you may have limited loan choices. However, your expensive options may be better than receiving no help at all.
Once you’ve verified that your credit history is accurate, you’ll be ready to check your loan options.
Pay Bills on Time
If your credit is poor or still building due to your payment history, auto lenders may assume you struggle to pay your bills on time. Prove them wrong by paying your bills responsibly from the start of your auto loan search.
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.
Explore Sub-Prime Lenders
In order to provide loans to “High Risk Borrowers”, sub-prime lenders might double or triple the interest rate. And to prove that the borrower can pay for the vehicle, the sub-prime lender might also require a down payment of at least 20%.
But if you’ve saved up a good chunk of cash, a sub-prime 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 be a relief for you and the lender. A co-signed loan may help you reduce your interest rate or 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 much higher than the loans you might find elsewhere. Still, an auto loan through a car dealer may be a good option depending on your credit. It should never be your first choice, but dealer loans are available if you need them.
Find out more ways to get auto loans by clicking here.