Introduction
It is difficult to get an auto loan when you have bad credit. However, it isnt impossible to get a bad credit auto loan. This is because there are some companies that specialize in dealing with car buyers who have a bad credit history. They will charge you a high interest rate premium though. For this reason its a good idea to try to clear up your credit history before seeking financing. You could possibly save thousands of dollars over the course of your loan just by doing this. Otherwise, here are some tips on how to get a bad credit auto loan.
Step 1
Start by taking a look at the current state of your credit. While you probably already realize that you have bad credit, you should still order free credit report from TransUnion, Equifax or Experian in order to see what is on it for sure. These can be ordered directly from AnnualCreditReport.com. Other sites will charge you.
Step 2
Carefully comb through your credit report before you apply for a bad credit auto loan. These agencies are well-known for making mistakes. For instance, you may have made a few late payments or had a charge-off but the date may be wrong. According to federal law, you can dispute any errors and itll have to be removed if the bureau cannot verify its accuracy within one month. So it is worth your time to dispute anything you think might be wrong. Otherwise you'll want to save up some money to make a large down payment and pay all of your bills on time for a few months. This will decrease the amount of your bad credit auto loan.
Step 3
Apply for a bad credit auto loan after the credit bureaus are done processing any disputes. You'll have new copies of your credit report that may look more positive whenever it is assessed. This is important because your chances of getting a bad credit auto loan will increase with each bad item that is removed, especially if you are trying to get a bad credit auto loan from your local bank or credit union that already knows you.
Step 4
If your initial loan is denied you should apply for alternative financing as soon as possible. Each credit application will lower your credit score unless it is made within one month of the original inquiry, which it will then only count as the one inquiry instead of several. As a last resort, you may want to get a bad credit auto loan from the dealer themselves. This will carry a higher interest rate and give additional profit to the dealer as well.
Step 5
Another option is to get a cosigner instead of getting a bad credit auto loan. However, you will need to find a cosigner who is willing to accept full responsibility for the loan and the possibility of having their credit ruined if you default on it yourself. This is why you shouldn't involve anyone else if you think there's even the slightest possibility of making a late payment or defaulting on the loan.
Tips
It will always be easier to get a loan whenever you have good credit so this is something that you should continually work on.
