You would like to buy a car, but your credit score is not the best. Before deciding that an auto loan is out of the question, take the time to consider your options. With a little time and effort, you can find a lender who is willing to take a chance and help you buy a dependable used vehicle.
Start With Traditional Lenders
You may think that your bank or credit union will not provide the financing needed, but don’t write them off so quickly. Many traditional institutions do have sub-prime lending arrangements that are right for consumers with credit ratings similar to yours. Contact a loan officer at the institution where you have a checking or savings account. Outline your financial situation, including your current credit score. That quick conversation with the loan officer will tell you if it is worth the time and effort to fill out an auto loan application.
Check with High Risk Lenders
There are loan companies that specialize in what is known as sub-prime or high risk lending. Expect to pay a higher rate of interest as part of the deal. Compare terms with several different high-risk lenders, since one of them is bound to offer rates and terms that are better than the rest.
Buy Here Pay Here Financing
Consider checking out vehicles at car lots that offer in house financing options. Sometimes called buy here pay here financing, the qualifications for obtaining a car loan are more relaxed. If you have a stable monthly income over a certain amount and a permanent residence, the chances of being approved are very good.
Remember that of all the options for bad credit car loans on the market, the buy here pay here strategy is likely to be the most expensive. The rate of interest could be more than the other sub-prime loans you’ve considered. There is also the possibility that you will need a larger down payment on the front end.
Before you accept any offer for financing, take the time to read the loan terms and conditions carefully. Look for any clauses that have to do with charges for processing monthly loan payments, recurring account maintenance fees, or any other expense that would increase the amount you have to repay. By understanding the exact nature and scope of your commitment to the lender, it will be easier to honor the obligation and use the loan to gradually bolster your credit score.