You may think that with your damaged credit there is no way you can get a loan for a new or used car, but there are lenders that approve loans for buyers even if they have bad credit. Oftentimes, these companies have tighter requirements and these loans sometimes involve high interest rates and fees, but it you’re willing to make that sacrifice, then they have the loan for you.
In searching for the perfect lender willing to give you a car loan even with your credit issues, there are a few basic steps you need to take in order to be successful.
1. Choose Your New Car Wisely
This may apply to pre-owned or brand-new cars, but the fact remains that the you must remain realistic when it comes to searching for a car. Choose a car that fits your needs and that you can afford. Remember your choices today can impact your financial condition years into the future—one bad move, and you could find yourself in financial disaster in just a few years. Be realistic in your expectations and take the time to search for the right vehicle you can afford. When in doubt, read car reviews and get unbiased opinions about cheaper models. The automotive world is massive, so choose wisely.
2. Find a Reputable Dealer
After determining what car to buy, find a dealer in your area that offers financing for folks with bad credit and is affiliated with lenders and banks that specialize in this area. You could always find your own lender—there are plenty on the Internet these days—but it never hurts to inquire about such programs at the dealership and compare offers. This will give you a better idea on how lenders adjust interest rates according to your needs, and show which is more flexible in the payment plan offered.
3. Monitor Your Credit
It is relatively easy to obtain a copy of your credit report online; in fact, you are entitled to a free credit report from each of the three main credit-reporting companies every year at annualcreditreport.com. Use this report to keep an eye on old negative marks, new inquiries, and errors. You can also use free credit monitoring services like Credit Karma and Credit Sesame, which almost instantly alert you of new activity and provide monthly updates to your credit score. For an even deeper look and on-demand credit score updates, you can pay for the monitoring services from the "big three" of credit: Transunion, Equifax, and Experian.
4. Plan to Improve Your Credit
Luckily, bad credit doesn’t follow you around forever, and it is possible to turn things around with a little bit of time and a regimented plan. The first plan of attack is to cut out all unnecessary luxuries to pool as much free money together each month as you can. Use this money to attack negative items on your report and to pay off any outstanding revolving debts like credit cards. With the negative items and credit cards in check, you should start seeing your credit score increase bit by bit each and every month. The higher your score, the better chances you have of getting a more affordable car loan.
Getting car loans is a reality even with bad credit. It takes patience and perseverance to recover from a financial slump, but lenders and credit unions offer affordable plans that suit people with bad credit and past history of bankruptcy.