Bad Credit Car Loans

Is your credit score of less than 620? If so you are what lenders call a subprime borrower. A subprime borrower is a borrower who lenders believe pose a higher risk than a borrower with a higher credit score. Subprime borrowers can still get car loans you just have to be a little more persistent and willing to pay a higher interest rate than prime borrowers.

Getting A Car Loan At The Best Rate

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What can you do as a subprime borrower do to get the best car loan possible? First you need to obtain your credit reports and review them for accuracy. There are three independent credit bureaus, TransUnion, Experian and Equifax. Federal law requires the three bureaus to provide you with one free credit report from each credit bureau once a year.  You can get your credit report with a score here.  You need to have your score.  Your credit score does vary some so don't worry if your score is a little different then what a lender is saying you have.  If your FICO credit score is off a lot then you know there is something not right.

You can obtain your free credit reports online at each of the credit bureau’s websites. Once you obtain the three credit reports review them carefully to make sure they are accurate. If you find information on one or more of the credit bureau reports which is not correct contact the credit bureau and ask that the inaccurate information be corrected. Be persistent and keep working with the credit bureau until the misinformation is corrected. You will likely be asked to provide documentation of the correct information.  This is one of the first steps in getting your credit on the right track.  Do not dispute everything on the report if you do not have the documentation on file.  They will not take your claims seriously if you dispute everything and you have no documentation.

How Much Of A Down Payment Do You Need For Your Auto Loan

You also need to start putting aside money for a down payment on the car you want to purchase. A 20% or higher down payment will help to get you a better interest rate on your auto loan even if you have bad credit. You will also benefit from a higher down payment because you will need to barrow less which in the long run could lower your monthly payments or shorten the length of your loan and cost you less in interest.

Finding A Lender For Your Car Loan When You Have Bad Credit

Now you are ready to contact potential lenders. Always get more than one quote so you can compare interest rates and loan terms and requirements to determine which loan is the best for your unique situation. Interest rates are important but so are the length of the loan and any other penalties or fees the different lenders may assess.
For example, ask about prepayment penalties. If you are able to secure a better loan in a year or two or if you sell the car before the loan is paid off you do not want to be assessed a prepayment penalty for paying off the loan ahead of time. Some lenders will give you a better interest rate if you authorize automatic deductions from your checking or savings account for the monthly payments. Some lenders will give you a better interest rate if you have a cosigner for your loan.
Always start with the financial institution where you do your banking currently. Many financial institutions are willing to work with current customers even those with a less than perfect credit history. There are many lenders online who specialize in subprime loans.  The subprime lenders web pages usually provide online loan applications. Just search for bad credit lenders to find the lenders most likely to consider your car loan application.  The car dealership may have the best loan package for you.  If it is a dealership that specializes in bad credit, and not all do, then they can work with you to get you an auto loan.