How to Improve Your Chances of Getting a Bad Credit Auto Loan

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Even with poor credit.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - September 28, 2018

It’s always important to be prepared before taking out an auto loan, but it’s even more important with a bad credit car loan. Getting approved can be difficult, but the more prepared a borrower is, the better the chance they have of qualifying.

7 Helpful Tips to get a Bad Credit Car Loan

When it’s time to find bad credit financing on a vehicle, you may be wondering just how you go about getting approved. If you’re unsure of the process, here are seven tips you can use to better prepare yourself for the car buying process:

  • Check your credit score – Checking and double checking your credit score is the first big step toward auto loan approval. Credit scores can change on a weekly basis, and this is one of the first things lenders look at when determining auto loan approval. The most common score used is the FICO score, with 90 percent of the top lenders using it to determine rates for consumers.
  • Get your credit reports – A consumer’s credit reports show an extensive credit history that detail why their score is what it is. Consumers are able to pull their credit reports for free every 12 months from each of the three major credit bureaus, and if needed, can pay a small fee for any additional credit report pulls. Once the consumer obtains their credit reports, it’s vital to double check for any errors. These can be disputed and taken off the reports, which could improve their credit score.
  • Have a budget ready – Using your income, bills, online tools, and calculators, determine how much car you can afford. Besides the MSRP, you need to account for insurance, taxes, fees, and interest. Financing a vehicle can get expensive real quick, so run the numbers ahead of time before you head to a dealership.
  • Check for pre-approval – If you have a good relationship with your bank or credit union, visit them first. They may be able to pre-approve you for a car loan. Getting pre-approved takes the stress of knowing what you qualify for out so you can focus on the price of the vehicle.
  • Consider a cosigner – Many subprime lenders require a bad credit car buyer to have a cosigner on the loan. Your chosen cosigner must meet the basic requirements, and be willing to pay if you (the primary borrower) are unable to. Even if the lender says a cosigner isn’t required, you can still list someone as a cosigner and potentially qualify for a better interest rate.
  • Prepare a down payment – Subprime lenders require a down payment on a bad credit auto loan. A down payment is used as a cushion. Lenders are more willing to work with a consumer with equity already in the vehicle. Before taking out the loan, make sure there’s enough money to be used for the down payment requirement, which is generally either $1,000 or 10 percent of the car’s selling price, whichever is less.
  • Shop around – Buyers should try to get approved with multiple lenders to see which can offer the best terms. If the potential buyer has an existing relationship with a bank or credit union, they should go to them first. If the bank or credit union is unable to approve them, then they typically need to find a subprime lender. A word to the wise when loan shopping: to avoid multiple hard inquiries, make sure to shop around within the given time frame (generally between 14 and 45 days, depending on the credit bureau), or else your credit score can take a bigger hit than necessary.

Depending on the consumer’s situation, timing may be the biggest challenge. Each of these steps can take time, so plan ahead and don’t rush into the process.

The Bottom Line

Finding a dealer who can work with you can be a challenge on its own. Bad credit auto loans can be difficult to qualify for, but that’s why CarsDirect wants to help you get the financing you need.

Let us guide you toward a local dealership from our nationwide network of new and used special finance dealers. It’s simple to get started by filling out our no-obligation and free auto loan request form.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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