Getting approved for an auto loan when you have bad credit can be more challenging than doing so with good credit. But that does not necessarily mean that you are unlikely to get approved. Below are some helpful tips to make sure your auto loan application will still go smooth and hassle-free even with non-stellar credit.
1) Watch out for super long loan terms.
If you’re like most people with bad credit, you must be watching your expenses too. And of course, you don’t want to spend too much on your car. If that is so, keep away from long loan terms, like those exceeding 60 months.
Long loan terms may seem affordable because the monthly payments are smaller than in shorter terms. But keep this in mind as a rule of thumb: The longer the term, the more money involved.
Quick tip: An auto loan calculator can paint for you a bigger picture of a short auto loan and a long auto loan.
2) Don’t let lenders exaggerate your score.
You have bad credit because you have a low credit score. But knowing just this is not enough. You should know exactly what your score is, or at least the score range it falls under. You can do this by pulling out a copy of your credit report before applying for a car loan.
Quick tip: The government mandated TransUnion, Equifax, and Experian to provide free credit reports to requesting consumers through AnnualCreditReport.com. You are entitled for a free copy every 12 months.
With your credit report in hand, no lender can pull their trick on you and lie about your credit score. It’s important that you know well where you stand in your credit.
3) Find bad credit lenders in Atlanta.
Not all lenders are willing to work with people with unimpressive credit. But not all lenders who offer bad credit loans are reliable. Find reputable bad credit lenders in Atlanta and find assistance in BBB.com or the business lookup service in Atlanta City’s official website.
It’s better to work with a lender specializing in bad credit financing as these institutions are familiar with your needs and have established a name for it already.
4) Buy your credit score.
While you can get a copy of your credit report for free, you should opt to pay for your credit score. It’s true that there are a lot of online providers today offering free credit scores. But finance advisers say these scores only give you a vague idea of how much interest you could get. Credit scores that companies like FICO releases can give you a more accurate estimate. It’s worth the investment.
5) Fix your credit.
Your credit chiefly affects the interest rate you will get and the decision lenders will make on your application. If your credit is worse, it might be harder to get approved. So to avoid the hassle, make some time to improve your credit.
Paying down some debts and disputing errors in the credit report are some steps to improve a credit score.
6) Choose the appropriate car.
Don’t be ambitious in your car choice while you still have bad credit. You don’t want lenders to scratch their heads while looking at the car you want to get financed and stamp your application “Denied!” Lenders would rather see an affordable car choice, rather than a luxury or sports car, in bad credit applications. It’s more realistic. Unless you can prove you can pay off the loan on time, don’t go for expensive vehicles with dull credit.
7) Do the cosigner trick.
Did you know that a cosigner with good credit can help you get an auto loan when you have bad credit? A cosigner reduces the risk for lenders. He or she can lower the interest rate that will be charged you and speed up the application process.
8) Shop for the best rate.
Since you have bad credit, expect to be offered interest rates that are higher than those offered to people with better credit. That’s acceptable. But you should know whether an interest rate is too high. How would you know? Shop around, looking at two or three more offers and compare their quotes. You should also monitor current Atlanta or Georgia auto loan rates.