Imperfect financial decisions due to lack of experience, failure to realize the importance of maintaining good credit history, or even losing a job at the wrong time. All that could lead to bad credit. Well, we don’t have to be chased by our mistakes – we should be able to learn from them. Getting a loan, as it may surprise you, is not only going to help you buy what you need but also can help you repair your credit history. But how does one get approved for an auto loan with bad credit?
Continue reading to learn all about bad credit and car loans. You’ll find out what to do now and how not to get into this again.
Credit bureaus use different algorithms for calculating your credit score, and they do not reveal them. However, your credit score is primarily influenced by the following factors. Looking at them can give you an idea of what foul you may have made in the past, and what to avoid in the future.
When banks need to make a decision in regards to giving someone a loan, they request a report from a credit agency, like Equifax or TransUnion. While your credit score is a summary of your credit history, a report can contain a lot of detailed information.
In addition to your personal information, the report would normally include information on non-sufficient funds payments, credit-related court information, inquiries from other lenders, and a lot more.
Typically, major banks would refuse to deal with bad credit. However, there are companies that specialize in bad credit auto financing, and some of them can help you with this. Also, you can find the so-called “buy here pay here” dealerships.
Often, only proof of income will suffice as they don’t check your credit. But they also do not report your credit, which means that such a loan won’t help improve your credit history.
Here are a few tips that can help you get a loan with bad credit.
The very first thing you have to do is to understand the reasons for rejection. Normally it would be related to either your bad credit standing or your income, but not limited to that.
Once you know the grounds for rejection, you can plan your next steps. Rejection does not influence your credit score, so you may want to contact another lender. Next, plan your strategy and start working on your weak points.
Having bad credit is no fun already, but you don’t want to lose even more. There are subprime lenders that can try taking advantage of someone in a rather desperate situation. In such cases, they may attempt to trick you into buying things you don’t need, thus making you lose money, not save. A typical example is an insurance on your credit.
Ultimately, the right time to do refinancing of your loan is when doing it can save you money.
First, if you want to get better rates, you need to have your credit score improved. When you do, you need to add a few more variables into the equation. See, if there are fees with your current lender that you need to pay, like a prepayment penalty or a processing fee. The savings that your new loan can provide should at least cover these expenses. It is good to check for these things before you sign.
Also, take into account the loss of your car value. At a certain point, when you owe more than the car is worth, lenders can find it unreasonable for them to refinance your loan.
Don’t panic, if you think you might miss a payment. You’re not the first, and not the last. Don’t wait until the last moment and talk to your lender. You are not the first, and they may have some sort of relief program. If you believe your financial problems might stretch over several months, then it may be the right time to consider refinancing your loan.
At the very worst, you can sell your car. This is not going to be a step forward, but at least your credit score won’t suffer. With all that in mind, it is always a great idea to seek professional help and talk to a credit advisor.
Now that you are better informed about different aspects of getting a bad credit car loan, you should make your mind on what you really need. This will help you choose between available options at each step. Contact us and together we can build a strategy for getting you a car loan.
With a large number of car loan providers as our partners, our specialists can make your purchase happen and get your car delivered to your door – “from your phone to your home”.