Posted Monday, Jun 04, 2018
There are a few times in a person's life where they'll need to take out a loan. In most cases, at least one of those loans will be for a car. Unfortunately, getting the financing to buy a car can be difficult, especially if your credit isn't perfect. To help those who need a new ride, but their credit scores are holding them back, here are a few tips on getting a car loan.
Even if you're trying to buy a used car, a bad credit score can stop you in your tracks. The best thing you can do to help your chances of getting approved for a loan is to do whatever you can to increase your credit score before you start shopping. This can include paying off past overdue debts, putting credit errors in dispute, and adding positive information to your credit like paying credit card bills on time and in full.
If you have a little bit of time before you try getting approved for a loan, then you need to be on your best credit behavior. That means avoiding any and all bad credit mistakes and being on top of your current credit situation. A bad credit mistake would be something like opening a new line of credit or getting involved in a lawsuit. These are big red flags to credit lenders that will hurt your chances of approval.
Paying a higher down payment than what the loan calls for is a good idea for a few reasons. For starters, it'll cut into how much you have to pay back on your car. With bad credit comes high-interest rates, so putting more down up front will help you significantly in the long run. It'll also make getting your credit back up to where it needs to be a lot easier, which will help you avoid this situation down the road.
You should shop around to find the best rates when trying to get approved for a used car loan. Some used car dealers will work with banks to get you the buying power needed to purchase a pre-owned car, but you should still be cautious of high-interest rates. You will also want to test drive any car before buying. Roughly 20% of people who purchase a used car didn't take the opportunity to test drive it first, which can lead to buyer's remorse.
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