You may be very aware of the fact that you have bad credit. You know this with your list of late payments, collection notices, and the constant juggling act you’re performing each month about who to pay first. If this is the financial dance you do each month, you probably have really bad credit. If you’ve quit dancing this little jig and are worried about your recent coming back to haunt you, you should be. Getting behind in your bills is nothing to be ashamed of. But, you have to be diligent in getting caught up on them before you can go shopping for a new, or newer, car. The fact is, most lenders are not offering car loans for really bad credit.
What is really bad credit? You might as well call it no credit since lenders will refer to this as having deep subprime credit, and they don’t make a distinction between “really bad”, and “no”, when it comes to risking their money on a car loan. The loan business is deeply tied to risk. Each loan made carries with it the potential for never being paid back. This costs the lender money, which it needs to recoup, to some extent, in order to stay in business. Interest is one of the tools lenders use to help pay for the costs of risk to the company and, in those rare instances where a lender approve a car loan for really bad credit, it will come with a really high interest rate.
There are a number of nationally known, and reputable, lending companies that advertise their services for people with no credit. While beggars can’t be choosers, the handful of loan companies that do approve car loans for really bad credit give you some options to work with. All of these loans will, almost always, come with annual percentage rates over 10%. But, when it comes to selling car loans to people with really bad credit, lenders with such programs do not automatically say ‘yes’. When you begin shopping for lenders, be prepared for a thorough financial once-over.
Any lender selling car loans for really bad credit will want to know why you have such a low credit rating. You had better know a little something about your credit other than it’s “really bad”. Ordering your credit scores will tell you exactly how bad your credit really is. You can order them from the three credit reporting bureaus most widely used by lenders for a nominal fee. You can even get them for free, in some cases, as an introductory offer to using the tools they provide on their websites – tools that can be very handy in planning out your credit future. These companies are TransUnion, Equifax, and Experian, and each of them provide very accurate numbers. Order your scores from all three companies. Lenders will use them all, and so should you.
Your annual credit report is another resource you should keep on hand. Like your credit scores, you can order it from the big three credit reporting companies as well as from AnnualCreditReport.com. This document contains the details of all your financial transactions that don’t involve the use of cash. The information is supplied by banks, credit car companies, and other bill collectors, collated and analyzed to calculate how you will behave with future loan agreements. The result is expressed as your credit scores. With a document this extensive, errors can occur. You can have them disputed and corrected thus, improving your scores.
Knowing your financial self a little better will help you in the process of finding the right loan for you. True that having really bad credit limits your options, but it does no harm to keep shopping. In most cases, your willingness to post a substantial down payment can help to get approval, and maybe lower your interest rates as well. A down payment helps to alleviate some of the lenders doubts about your seriousness in the car loan. The down payment also takes away some of the principal on which you’ll be paying interest which, in turn, will reduce your monthly payments. You might feel the pinch in your finances now, but you’ll have a lot less stress on your budget over the term of the loan.
Before you decide to attempt to get a car loan for your really bad credit, you should take a long look at getting your credit problems straightened out first. Live within your means. Plan a budget and stick by it, trimming out all the little money-wasters you normally don’t give a second thought about. Pay down any outstanding balances with those carrying the highest interest rates taking priority. Your car purchase may not wait but, if you can squeeze a few more miles out of your car, then do it. Give yourself some breathing room before you try to take on a new debt. Your credit may not have hit bottom yet, but try not to do anything that will push it closer.