When you have bad credit and need a car, it's hard to get approved for a traditional auto loan. But needing a car is the type of problem most people can't wait a lot of time to solve. Luckily, there is such a thing as a bad credit auto loan. These loans are available through car dealerships that are signed up with subprime lenders (those willing to work with applicants with poor credit).
While these loans can be more expensive than traditional ones, due to their higher interest rates, there is one big positive to focus on: A bad credit auto loan gives you a chance to improve your credit. All you have to do is make every payment on time.
If you have bad credit and need to finance a car, this is what you should focus on. The loan will help you get the transportation you need while giving you the chance to rebuild your credit. When you think of it that way, you can, with a little preparation, set yourself up for success with your bad credit auto loan.
Tips for Success
An auto loan is a great credit builder, but only when paid back responsibly. So, focus on making all of the payments on time and in full. You can help yourself in that regard by putting a plan in place beforehand.
- Know Your Credit Scores and Credit Reports
Head to the dealership armed with knowledge about your credit. This way, nobody else can define your creditworthiness for you. This also gives you the opportunity to check your credit reports for errors. You can dispute these and have them removed, which may improve your credit score.
- Choose an Affordable Car
A bad credit auto loan is not the time to buy your dream car. Remember, it's not about the vehicle, it's about making the payments on time. And your car choice is a great way to keep the loan affordable. Ideally, your car payment should account for no more than 10-15% of your take home pay.
- Keep the Loan Term as Short as Possible
Another way to keep your loan affordable is reducing the loan term. Yes, a five-year loan will likely come with a lower monthly payment compared to a three-year loan, but you need to look at the bigger picture. Always consider the total cost of the loan, not just the monthly payment. Extending the loan term means paying more in interest expenses. Reducing the term will mean paying more each month, but it will reduce the total cost of the loan.
- Prepare a Down Payment
The more you are able to put down, the less you'll have to finance. This makes your monthly payments lower, reduces the amount you end up paying in interest, and can even make shortening the loan term possible.
If you follow this advice, it will help you make all of your payments on time. Then, your bad credit auto loan will be truly successful in the sense that you'll get the transportation you need while also improving your credit.
If you are dealing with credit problems and are struggling to get approved for financing, Auto Credit Express can help. We work with a nationwide network of car dealerships that are trained in special finance.
Our service is free and puts you under no obligation, plus we work fast because we know these things often can't wait. See what we can do for you by completing our secure car loan request today.