Some people with poor credit often feel discouraged to apply for car loans. Fortunately, many lenders and car dealerships offer bad credit auto loans. Bad credit auto loan financing allows buyers to get the car they want and improve their credit score. What is even better is buyers do not need to apply the loan from third party lenders and financial institutions. Consider the following steps when obtaining in-house financing:
Know your credit history
Get a copy of your credit report. This provides complete details on your credit history such as current information, balances, delinquent payments, bankruptcies, and personal identifying information. This also reflects on your credit score. These facts are important when you are applying for different types of financing such as mortgage, credit cards, and auto loans. Car dealers will check your credit rating, whether you are applying for traditional or in-house financing. Although dealers prefer those with high credit scores, some also offer financing for those who have the opposite.
Bad credit financing often has a higher down payment compared to traditional auto loans. As such, save money before applying for one. A high down payment decreases the amount you need to cover for the duration of the loan.
Locate car lots
Find dealerships that provide bad credit financing. Look for car lots with signs saying "We Finance", as these indicate in-house financing is available. Some dealers also prefer to work with customers who live nearby since it is more convenient to maintain financial agreements when both parties live in the same area. Choosing a nearby dealership also eliminates sending payment through money transfers and deliveries.
Consider buying used cars
Buyers have better chances of qualifying for a bad credit auto loan if they choose pre-owned vehicles instead. Used cars do not necessarily mean sub-standard or defective vehicles-you can still find used cars worth your money. If you are planning to buy pre-owned vehicles, locate car dealerships that do their own financing. Choose one that offers weekly or bi-weekly installments. Although this type of financing has higher down payments compared to traditional car loans, it can help improve your credit score.
Pay on time
Bad credit auto loans tend to have higher interest rates. As such, it is wise to pay your dues on time. This can also be a good chance to re-establish your credit score and make a good impression on lenders, as some dealers report to credit bureaus. Find out if the dealer will repossess the car or default the loan if you fail to pay on time.
Get a co-signer
Having a co-signer can make your loan application easier. A co-signer is a person who will take over the borrower's responsibility if the latter fails to meet the payments. Ensure you have enough finances to cover the loan before getting a co-signer. Doing so will avoid any disputes in the future.
Make the best decisions
Choose wisely to get the most out of your bad credit auto loan. Do not get bad credit financing if you are unsure of your ability to pay; otherwise, you might only make it worse for your credit. Analyze your choices properly, especially when it comes to dealers, car types, and payment modes. Compare costs and the benefits you can get from the financing. Use this opportunity to improve your credit standing.