Life is rarely convenient, so if you find yourself in need of a new vehicle but your credit is subpar, it may feel like you have no options. Before your brain begins a downward spiral of thinking, (you now have no car and you don’t have credit to get a car so you can’t get to work, which means you will lose your job and your credit will sink even lower) take a deep breath and take a few minutes to read over this article and learn a few ways you can get an auto loan with bad credit.
1. Know Your Credit Score
Before you begin applying for auto loans, make sure you have a basic understanding of what your credit looks like. You may discover that your credit is not as bad as you thought (or just the opposite). Once you know what your credit situation looks like, you can set realistic expectations for the type of loan and vehicle you can afford. Be sure to get a free credit report from each of the three main credit reporting agencies (Experian, Equifax and TransUnion) at least once a year. Not only will this help protect you from identity theft, you will always know what your credit looks like. Note: You will have to pay an additional fee to see your actual credit score.
2. Have a Cash Down Payment
To improve your chances of getting a car loan with bad credit, consider setting aside cash for a down payment. Having a sizable down payment can impact the interest rate and the amount of a loan you will qualify for. Ideally, you should have 20 percent of the total purchase price of your car for a down payment (roughly $2,250 for a $15,000 car). But, any amount you can put towards the down payment will help. A down payment can help lower your monthly payments. If your income is already stretched, you should seriously consider a down payment to reduce the stress on your budget.
3. Have Realistic Expectations
You should know that if your credit score is bad, you will not qualify for a car loan on a luxury vehicle. You will likely not even qualify for a loan on a brand new car. Used vehicles have lower price tags which makes a down payment more affordable for you. There are plenty of quality used cars available for individuals with less than stellar credit.
4. Make All Your Monthly Payments on Time
Your credit score is impacted by your ability to make monthly payments on time. If you know that you will need to purchase a car within the next few months, make every effort to pay all of your monthly payments on time. This can improve your credit score and make it easier to land a good rate on your auto loan. In particular, other loans (such as a home loan or a student loan) should always be paid on time. Even if your debt-to-income ratio is high, showing that you take responsibility for your debt payments goes a long way towards swaying a lender in you favor.
Bad credit affects roughly 25 percent of Americans, so you are not alone. Blue Sky Auto Finance understands that and wants to help you get into the car you need. Blue Sky Auto could provide you with the loan you need to get the car you want. For more information visit our website for an online loan application.