If you are shopping for a car loan with a bad credit history and have had some credit applications rejected by lenders due to your low credit score, you may think you will never be approved to buy a car. In order to purchase a car with a bad credit history, be flexible with your choice of vehicle. Also be prepared to furnish proof of your address, proof of income and bank statements that go back several months. Having this information will help you get a new or used car loan during or after bankruptcy.
Step 1: Contact Dealerships
Get in touch with local dealerships. Ask if they provide any new car buying programs for shoppers with low credit scores. You will find that some dealerships respond affirmatively, while others say that their lending programs are available only to well-qualified buyers. If dealerships do not respond via the Internet, call them or visit for a consultation.
Step 2: Provide Credit Information
Just as you expect a car dealership to be honest to you, you should set the same expectation when visiting a showroom. Let the salesperson know that you have some bumps in your credit history and that you are considering a new vehicle. The salesperson may introduce you to a sub-prime finance manager immediately, or they may go over some of the options the dealership offers for car loan rates after bankruptcy. In any case, you will need to complete a credit application so that the dealership can submit your application to multiple lenders. Considering the offers of multiple lenders may help you get a lower rate or a longer repayment term, both of which will lower your monthly payment.
Step 3: Consider a Down Payment
Decide if you can make a down payment. One of the easiest ways to offset the difficulties of getting a loan with a low credit score is to place a large down payment. This will reduce the lender's exposure, and it will also show that you can responsibly budget and save your money. Another benefit is that a large down payment will also lower your monthly payment. At first, you should confirm the dealership will submit the application assuming no money down. If one is deemed necessary later, the down payment amount can be revisited with the dealership.
Step 4: Await Approval
Once your credit application and new vehicle information is received by the lender, they will review your application. An application may be approved as submitted, at which point you can complete your loan and title paperwork. The lender may approve the application, but with conditions, such as proof of income or a $2,000 down payment. A rejection is also possible, in which case the lender will not consider your application due to credit score, debt-to-income ratio or payment-to-income ratio.
Step 5: Consider a Cosigner
Consider a cosigner. If your application has been declined by the lender, consider a qualified cosigner. If their credit score is higher and they are closely related to you or live at the same address, a cosigner can strengthen your application.