How to Find Auto Loan Deals for Bad Credit

March 18, 2013

A look at car financing through loan consolidation services, sub-prime lenders, and the 4 best places to find an auto loan.

To find auto loan deals, the most important thing for you to be aware of is exactly what your credit is like. Get your credit report and review it carefully. Challenge anything and everything you don't recognize. Any creditor that doesn't reply within 30 days has to remove any derogatory remarks on your report. If you have bad credit, try applying here with CarsDirect, a specialist in Bad Credit Car Loans.

If you have a foreclosure, eviction or repossession on your report, have written statements explaining them ready when you go car loan shopping. If you have a trade in, thoroughly research it to determine its fair market value. The three top sites for car valuation research are CarsDirect, Edmunds.com and the Kelley Blue Book website.

Find out if you qualify for an auto loan >>

Places to Find an Auto Loan

Here are a few of the best places where you can apply for a no credit auto loan easily.

  • Online lenders that specialize in bad credit loans. You will be able to find many lenders who are willing to lend you money even with bad credit. But as a precaution, check with the most reputable sites first. Check the state insurance bureau to find out whether the site has any complaints against it and then make sure you get as many quotes as possible. CarsDirect is the online leader in helping credit challenged customers get auto loans. Apply Here
  • Quotes from larger national lenders with small state lenders. Most large lenders will be able to offer you better interest rates as compared to small lenders who cannot afford to lose money with bad credit customers. Here too, take the time to compare different quotes of national lenders with each other to get the best rate.
  • Local dealers. Please note though that this will turn out to be the most expensive but you will get approved right away.
  • Local cooperatives. These small lending companies will give you the best interest rates, but you will require a reference and maybe a guarantor before you get approved.

If you have a good working relationship with your current bank, this should be your first stop when loan shopping. Another option for anyone looking for an auto loan, and especially those that need a car loan with bad credit, is a credit union membership. Being member-owned, credit unions are more likely going to be more ready and willing to offer loans at better rates than the typical auto lender.

Get in touch with auto loan lenders who will finance subprime buyers. Compare the loan terms and the interest rates offered by several auto loan lenders to get an idea about the money that you will be required to spend to meet the loan requirements. Researching online for well reputed auto loan lenders and comparing the quotes offered by them is the most effective way to find out your options for bad credit loans.

If you wish to finance your car through a dealer, make sure that you get approved for a car loan before you go to the dealer. This will help you in getting a better bad credit loan rate from the dealer.

Keep Important Documentation Ready

Collect documents that will help in counteracting your bad credit rating. Documents that prove that you have a stable employment history and a regular source of income or a good banking history will definitely help in approval of your loan. Keep the required paperwork like a driver's license, proof of insurance, bank and credit card account information, Social Security Number, references, paystubs, proof of residence and current utility bills ready to expedite the process.

Bill Consolidation

If it is possible, an individual with bad credit and a lot of debts may want to consider consolidating their bills into one. There are loan consolidation and budget counseling services that work almost exclusively with these types of borrowers. Their goal is to help the individual get back on their feet financially by easing their debt burden. Loan consolidation works to reduce fees and charges, eliminated late fees and penalties where it can, and get the individual back to paying their bills regularly.

Consider a Used Car

One alternative to buying a new auto for a person with bad credit may be to consider a used one. Some dealers, who are looking to reduce their inventory of used cars in favor of newer models that have a higher profit margin, may be willing to work harder with a motivated buyer that has bad credit. This can be accomplished through working with lenders who work exclusively with at-risk borrowers.

Sub-Prime Lenders

Lenders who specialize or work with borrowers with bad credit are often referred to as sub-prime lenders. The word sub-prime has a particular stigma attached to it as it relates to loans made to individuals who may not be able to pay them back. This stigma may be unfair to many people who are hard-working and responsible individuals who may have experienced a temporary financial setback. The opportunity provided by a sub-prime lender could be the leg up needed to get a person back on track.

See what kind of interest rates you can get >>

There are several lenders who work almost exclusively with borrowers that have bad, poor or no credit. These sub-prime borrowers have to meet criteria established by the lenders in order to qualify for second chance financing, including:

  • They are up-to-date on their bills and debt obligations.
  • They have not declared bankruptcy or have had a bankruptcy discharged.
  • They are of legal age, which is 18 in most states.
  • They are United States citizens.

It is at the discretion of the lender to waive any or all of these requirements as deemed necessary to meet a need to lend to certain communities and provide access to loans.

Sub-prime borrowers may prove to be good customers for some dealers. There are no guarantees that given another opportunity to establish a good credit rating that a person in financial straits will respond positively. The hope is, however, that those individuals who are truly deserving and demonstrate a minimum level of responsibility will benefit from efforts by certain lenders to extend financing choices to them.

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