If you need a vehicle when your credit isn't the best, Auto Credit Express can help you find financing for a subprime auto loan. However, there are still ways that you can prepare for your loan on your own. And there are a few big mistakes that you are going to want to avoid when financing a car with less than perfect credit.
Subprime Auto Loan Mistakes to Avoid
Here are some mistakes that you are going to want to avoid making:
- Not Knowing Your Credit
If you go into the process without analyzing your credit reports or looking at your credit scores, then the dealer gets to define your creditworthiness. Instead, you should request copies of your reports from the major credit bureaus - TransUnion, Equifax and Experian - and analyze your situation. You should check your credit score from a few sources too. This way you can do some research and figure out what people in similar circumstances are generally able to qualify for when it comes to auto loans.
- Only Thinking of the Monthly Payment Amount
Extending the term of your loan will make your monthly payment amount lower, which seems good. However, the interest rate you will qualify for is largely dependent on your credit score. The interest charges that you would end up paying over the course of a longer loan will end up making it cost more in the long run. You want to get a vehicle that you can comfortably afford, but you also need to consider the total cost of the loan.
- Failing to Consider Depreciation
New or used, a car will depreciate in value over time. If the down payment that you make is minimal, you may soon find that the amount you owe on your loan is more than the value of the car. This is known as having negative equity, or being "upside down" on your loan. If the car is wrecked or stolen, you would still be responsible for the discrepancy. To combat this, you can either save up for a large down payment (financial experts recommend 20%), take out a short loan (3 years or less), or you can get GAP insurance from your insurance provider or the dealership. With GAP coverage, the insurance company covers the difference between the balance of your loan and what your auto insurance provider pays for the retail value of the car if it is totaled or stolen. You don't want to end up paying hundreds or even thousands more on a vehicle you no longer have.
An auto loan is a great way to get your credit back on track, but making mistakes like these while financing a vehicle with damaged credit can end up causing more damage. Take care to avoid any further setbacks and soon you can put your bad credit in the past.
Knowing Who Can Help
Not every dealer can get you approved for an auto loan when you have bruised credit, but Auto Credit Express can help. We have been helping people with subprime credit find financing for almost two decades, and you can be next. To start the process, all you need to do is fill out our free and secure online application.