If you’re working with bad credit, it can feel like banks close their doors before you can walk in and that credit is impossible to find. And yet, auto loans for people with bad credit are issued every day, to people with credit problems for all sorts of reasons. How does this happen? What’s the secret formula? How are auto loans for poor credit borrowers even possible?
A Good Loan Vs. The Best Loan
Simply put, there isn’t really a secret formula, or at least not what you might imagine, where a password is muttered and suddenly you can get a loan. It’s a matter of how the auto loan market has shifted over the last few years since the economic problems of 2008, and the necessity in many places of owning a car.
You should be aware, though, that poor credit auto loans don’t come without strings. Whether you’re getting a mortgage for a house or buying a car, financial products are all about risk. The worse your credit score is, the more they’re going to hedge against that risk in the loan. This can mean higher interest rates and lower ability to borrow, depending on your credit and your circumstances.
It may also mean that some lenders won’t work with you, something those of us with weak credit have experienced all too often. So you will have to do your research and, just as importantly, demonstrate that you’re somebody worth lending money to.
Finding The Best Loan
It starts, of course, with you. You can get your credit report for free, once a year, and you should take the opportunity to look it over for any errors, problems, or other issues. Even fixing a few minor issues on your report can improve your score and thus make it easier to secure auto financing with bad credit.
Another way to clean up your credit is to get up to speed on your payments as much as possible. Getting current will improve your score, but make sure you can stick to any payment schedules, as you don’t want your score to drop.
After that, look into saving up for a down payment. If you have the time to save up even a small amount to put towards the car, this will both make you a better credit risk and mean you have to borrow less, making a loan more likely to be approved.
Next, it’s a matter of finding the right lender. Part of the issue is that many people believe that poor credit auto financing can come from their bank, their dealership, and … that’s all. But there are plenty of other lenders out there, and you just need to locate them. Often you can do this through a lender’s network, or by searching online, but make the network your first stop; many will allow you to apply to dozens of lenders after filling out just one application.
In short, the “formula” is simpler than you think: Do your research, save your money, and choose the right lender. With that, you’ll always get the bad credit auto loan you need.