At some point in life, we’re all dealt a financial setback. It could be a layoff, it could be a medical issue that piled up bills and kept you from working, or it could be any of a number of other problems. The key point is that you’re getting back on your feet, but you need a car, and you’re worried that bad credit auto financing isn’t possible. Yet it is … you just need to know what to expect.
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Poor Credit Auto Financing
First of all, buying a car is not the same thing as opening a credit card. When buying a car, you’re asking to borrow money to purchase a tangible asset that has value, so essentially, you won’t face the same issue with buying a car that you might face opening a credit card or securing another type of loan.
However, bad credit auto financing does have some issues worth being aware of, the most common of which is that you won’t be able to get the best possible terms. Interest rates will be higher, you may not be allowed to borrow as much depending on the lender, and shopping around becomes even more important. However, there are things you can do to address these concerns.
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How To Get Bad Credit Auto Financing
In order to improve your odds, start with your credit report. You can get a free copy from each of the major credit bureaus every year, and you should check it over for any errors or mistakes that may be present. It may not boost your credit score over a threshold, but every bit helps.
Secondly, put together a down payment. Even if you can’t put down the traditional 20% that’s generally asked for in a loan, put together as much money as you can. This is important for a few reasons; if you’re willing to put up some of your own money, it can both help you secure a car you might otherwise not be able to afford, and make you more attractive to lenders, Many view being able to provide a down payment for the car you want is a gesture of good faith and makes you more likely to make your payments.
Thirdly, gather documents beyond your credit score that demonstrate a good financial history. For example, you might be able to present a few years of tax returns as proof that you’re a good credit risk, beyond what the score tells the lender.
Next, shop around. As the economy has changed and it’s become clear more people have dealt with financial setbacks, a new breed of lender has become commonplace to help with securing auto financing. By comparison shopping and looking beyond just your local bank and dealership, you’ll often be able to find better terms and deals that you might not have come across anywhere else.
Finally, and most importantly, remember that you’re far from alone, and that lenders want to work with you. In the end, the key to getting the right bad credit auto financing is often about sticking with it and not giving up.