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 > How to Get Auto Financing With Bad Credit |
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The
impact that credit scores have on financial life can make it seem as though
bad credit closes the doors to many opportunities. Bad credit is not the end
of the world, but until credit is repaired, compromises are usually
necessary, especially when it comes to financing a vehicle. Qualifying for
auto financing with bad credit will take some work, but it is far from
impossible.
Instructions
Step 1
Order a copy of your credit report. Credit reports are available online from
a variety of sources. While you may already know that your credit is less
than perfect, a review of your credit report will let you know exactly what
you are working with. This review also gives you the opportunity to look for
and correct any erroneous reporting.
Step 2
Understand your credit score. Credit score numbers range from 300 to 800,
where 300 is poor and 800 is excellent. Scores lower than 620 are viewed as
high risk, and lenders refer to scores in this bracket as subprime. Subprime
auto loans almost always have higher interest rates and require a down
payment, co-signer andor trade-in vehicle to qualify.
Step 3
Recruit potential co-signers. Friends or family members with good credit
history may be candidates to co-sign on your auto loan. A co-signer applies
for financing with you, and his good credit could help you qualify for a
lower interest rate. Keep in mind that co-signers share legal responsibility
for repayment of the loan, so if you go into default, the co-signer will be
held liable.
Step 4
Review financing options. Search online for car dealerships in your area.
Some dealers have financing departments dedicated to buyers with credit
problems. Independent buy here, pay here dealers provide in-house financing
without the traditional finance qualification process, and these can be a
solid option if your credit is extremely bad. You may also be able to secure
your own financing online.
Step 5
Assess your budget. Consider that subprime auto loans can have interest
rates up to 25 percent. This can drastically increase the total price you
pay for the vehicle. Bad credit leaves little room for interest rate
negotiation, so plan to provide a trade-in vehicle or substantial down
payment to make your monthly payments affordable.
Step 6
Contact dealerships that offer programs that could meet your needs. Explain
your credit situation, tell them what you can afford and what you can offer
as a down payment. If you have a vehicle for trade, ask what they will offer
for it. Keep notes about what each dealership can do for you.
Step 7
Choose the dealership that offers a financing plan that best meets your
needs. If only one offers you financing, the choice is easy. If multiple
dealers can finance you, choose based on vehicle selection, interest rate,
loan term and payment schedule. Bring your driver's license, down payment,
trade-in vehicle, proof of insurance and co-signer to the dealership. Take
your vehicle of choice on a test drive, then sign the financing contract.
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