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In the beginning of the global recession, it was almost impossible for buyers
with a bad credit score to obtain car loans. The good news is that it is now a
good time to buy a car. In the past two years, the number of approved auto loan
applications from buyers with lower credit
scores has been on a steady rise. Not only are
lenders granting more bad credit auto loans
these days, the average credit score for
financing a car has decreased several points
and buyers are even gaining access to more
substantial loans. Lenders are also providing
lower monthly payments.
Tips on how to obtain car loans for bad credit
Find out your credit score
Aside from your credit report, which you can secure at no cost from pre-
eminent credit bureaus once each year, you also have to get your credit score,
which you can purchase from the same agencies or from FICO. If you know
your credit score, you will know what car and financing options are available to
you. You will also determine the interest rate you will likely pay when you
obtain a loan.
Check out more than one lender
Lenders make use of various criteria to help them come to a decision whether to
grant your loan application or not. Your credit score will be one of these
variables. Nevertheless, even if your score is low, you should not assume that
you are not anymore eligible for loans since one loan provider may accept a
score that another lender wouldn’t. That said, you should check out a number of
loan companies.
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Build your savings first
For the majority of car purchases, the
bigger your down payment is, the better.
This is considerably more important if
your credit standing is poor. Lenders will
be more likely to approve your loan
request if they know you can pay around
20% of the purchase price as down payment for a new car or around 11% for
pre-owned ones.
Obtain a loan before you go to the dealer
Dealership financing is costly and multiple requests for your credit report can
negatively impact your credit score. Therefore, it would be smarter if you obtain
a loan from your bank or other lending institutions before heading to the car
dealership.
Consider a reliable, pre-owned vehicle
If you have a a low credit score score, it is usually much easier to get a loan for
a used car than a brand new one. Pre-owned vehicles can give a decent value for
a lower price, but you need to learn as much as you can about the car prior to
buying it. Research the fair market value of the car, verify its history, and have
it examined by a dependable mechanic.