In the past, getting bad credit auto loans meant that you had to have a cosigner with you who could leverage their good credit against your bad to help you get the auto loan that you needed. Now, however, car loan lenders are making it increasingly easy for people to get the financing that they need without necessarily requiring that they enlist the assistance of a cosigner. If you are looking for assistance for bad credit auto loans but you do not have a cosigner available to help you out, the following information may prove to be invaluable.
Apply now for a Bad Credit Car Loan with No Cosigner or read below for more information.
There are several options available if you are looking for bad credit car loans. While many car dealerships have turned toward only providing auto loans for "well qualified" applicants, there are abundant other sources for auto loans, even if you do not have perfect credit.
Good Credit versus Bad Credit
First and foremost, you need to be aware of what your FICO credit score is to know where you stand in terms of credit worthiness and credit risk. FICO credit scores range from around 350 to around 850, and everyone has one even if they do not have any credit yet. The lower your score is, the higher your interest rates will be for auto loans.
If you can raise your credit score in any possible way before applying for an auto loan, it will benefit you greatly. You may not need to have the best credit in the world in order to be approved, but better credit is always better in the long run when it comes to monthly payments, interest rates and other details of your auto loan.
Many Americans would be surprised to discover that they may very well be one of those well qualified loan applicants that are so heavily vetted by the auto industry. Generally, a good credit score for an auto loan is above 680 to 700. An excellent credit score is actually considered anything above 700 to 720. Interestingly enough, the average credit score in the United States is 680, so you may actually qualify for better auto loan terms than you might expect.
Even if your credit score is below 680, however, you can still find an auto loan that may have relatively good credit terms. While a bad credit auto loan might have a higher interest rate, it is often still very do-able for most people with good stable income.
Poor Credit Financing
Other than your credit score, there are other factors that lenders look at when considering a borrower's application. These factors include income, employment history and residency history.
Most lenders will ask for verification of your income and employment information. Most auto loan lenders are going to require single applicants to have a consistent level of employment, typically coupled with specific earning requirements. You may be required to earn a certain amount of money based on how much your monthly payment is going to be. In general, most lenders require at least 90 days of steady employment for bad credit auto loans.
Usually, you can demonstrate this by supplying a copy of your most recent pay stub or the past several pay stubs. Lenders are looking for evidence that you will be able to afford the monthly payments for the car you intend to purchase. If you have recently started working at your current employer, but have a good stable previous employment history, this information should be reflected on your credit report.
Avoiding the Need for a Cosigner
If you have all of the other loan requirements in place, but are still turned down for a car loan, it may be that a lender believes you are unable to afford the car or your recent credit history is detrimental. If possible, ask the financial manager for an explanation of what specifically lead to being turned down for the loan.
If the issue is affordability, there are several ways to counteract this situation. One way is to turn to a private party or personal friend for a down payment. This will lower the purchase price of the car and lower the monthly payments. You can also report payments for this type of loan to credit reporting agencies and create positive credit history for yourself.
If the issue is poor recent credit history, then you might consider taking positive steps to repair your credit. If you did not get a copy of your credit report prior to applying for a car loan, then you will be entitled to a free copy if you are turned down for the loan due to your credit. When you receive the report, carefully review it and note any errors or incorrectly reported information and challenge it. Successfully removing several incorrect pieces of information will result in improving your credit rating. You can also report positive credit that is not included in your credit report and improve your credit score.
Related Questions and Answers
What is the Average Interest Rate for Bad Credit Loans?Bad credit loans generally gather a much higher bad credit interest rate as compared to normal loans. The actual interest rate will differ with every lending company. Private lenders also charge much more than cooperatives and government lenders. The rate will also be adjusted to suit current economic conditions. According to calculations done using a reliable online calculator, credit scores of 500-589 will gather an interest rate of 18.50% for a 48 month new car loan. But its a much better idea to check with reliable online calculators after putting in your particular credit score, car model, lender, and period of repayment at online calculators like Yahoo Car Finance. Or check with individual lenders with personalized quotes.
How much Lower would Your Car Payments be with a Co-Signer?Getting a co-signer for your bad credit loans can lower your car payments monthly. But the actual amount that will get reduced will depend on the profile of your co-signer, and the lender that is responsible for your loan. If you have a co-signer who has a really strong credit rating of 720 or more and upward, you can easily get a lower interest rate on your loan by as much as 3% less than what you have already been quoted. You can start by checking with online calculators linked to reliable sites like Yahoo Finance which will give the exact interest rate for your loan. Please note that this is completely dependent on the individual lender.
For a Car Loan Application, what Constitutes a "Well Qualified" Applicant?When you make a car loan application, lenders will review your credit history to find out your eligibility for loans. Its a simple way of guaranteeing that you will be able to repay the loan that you have taken. A well qualified candidate will have the following:
- A good credit rating of 700 and more
- A few lenders will evaluate your employment history, the length of employment at each company and the salary you are currently receiving. Future income probabilities from the same job are also counted. Working at the same job with regular pay hikes are a point in your favor.
- Low debt to income ratios also work in your favor. If you have no other loans, then you are more likely to be approved for a loan even with a bad credit history.
Please note that each individual lender will have preferences they follow while authorizing loans.
