If you are dealing with bad credit and need to finance a car, making informed choices becomes more important. Taking the necessary steps to prepare will not only make it easier to get approved, it has the potential to save you money and make it easier to improve your credit. These tips for preparing to finance a vehicle with poor credit can guide you along the way.

Check Your Credit in Advance

what credit score for bad credit car loanWell in advance of beginning your car shopping, it can pay to monitor your credit. This is because your credit will affect the terms of your loan.

Step one is to order your credit reports from all three major credit bureaus: Equifax, Experian and TransUnion. Once every 12 months, you are entitled to a complimentary copy of your credit report from each of those three credit reporting agencies.

It's not uncommon for mistakes to wind up on these reports, so you will want to look them over carefully. If you find any errors, you can file a dispute with the credit bureau in question and have them removed, which can cause your credit score to improve.

You will also want to have a look at your credit score beforehand. Knowing where you stand means no surprises. It also means nobody else can define your creditworthiness for you, plus you can research what interest rates to expect in your score range.

Have a Budget

Perhaps the most important thing you need to do with a subprime auto loan is purchase something you can afford. This means that you need to have a budget and the willpower to stick to it.

A good rule of thumb is to spend less than 20 percent of your monthly income on car-related expenses. That includes your monthly car payment, insurance, fuel, maintenance and repairs.

At the same time, you need to look at your lifestyle and driving needs. Ideally, you want to buy something that you can afford and meets your needs. For example, if you have a long commute to work, you will probably want to prioritize fuel efficiency. Or, if you have kids, it's probably safety and interior space that are important.

Focusing on your budget and vehicle needs allows you to enter the process knowing what you can spend with a good idea of what you want. However, it's worth noting that remaining flexible with your options can help you out if you have poor credit.

Focus on the Length of the Loan

If you have bad credit, you'll face a higher than average interest rate, and the longer your loan term, the more you'll pay in interest charges.

This is why it's important to focus on the length of the loan and the total cost as opposed to your monthly payment amount. If you turn your attention to getting a low monthly payment, you can easily get stuck in a long-term loan.

Ideally, if you have less than perfect credit, you'll choose the shortest loan term you can afford. This will bring down the total cost of the loan by helping you save on interest charges.

The Bottom Line

Using these three tips can set you and your wallet up for success with your auto loan, even if you are dealing with credit problems. However, what can still be a challenge is finding a lender or dealership that is willing to work with you.

This is because the majority of mainstream lenders—like banks and credit unions—typically only deal with consumers with good credit. It won't hurt to try to get approved with one of them, but your best bet is to apply with a special finance dealership.

Auto Credit Express can match you with one of these dealerships in your area. We are connected to a nationwide network of dealers that specialize in working with unique credit situations. Our service is free of charge and obligation, so you can get started with confidence by filling out our auto loan request form today.