Lifestyle

How to Get an Auto Loan with Bad Credit

Those who live in areas that lack a public transportation system must generally use a car to get to work or school. In most cases, car buyers get a loan to finance some or all of the purchase. How can an individual get a loan if he or she doesn’t have good credit?

Increase Your Down Payment

Let’s say that you really want to purchase a $20,000 vehicle because it is the only one that meets your needs. If you are willing to put half of the purchase price down, a lender may be willing to loan you the other half. Conversely, you could look for cars that cost less and reduce the amount of money that you have to put down or ask to borrow. A friend, family member or employer can contribute toward your down payment if you need help coming up with enough cash to get a loan.

Work With Bad Credit Lenders

Bad credit lenders work with those who have recent missed payments, gone through a bankruptcy in the past year or who have gotten divorced. While you should expect to pay a higher interest rate, it may be possible to get most or all of a car’s purchase price financed. Therefore, you can get the vehicle that you need without having to drain your savings account to do so.

Put Your Bad Credit Into Context

While a lender may only see that you filed for bankruptcy or that your last car was repossessed, it doesn’t mean that you haven’t learned from your mistakes. To get the loan that you need, it may only be necessary to explain why these events happened and how you plan to stop them from happening again. For example, you could point to a positive credit history over the past several months or the fact that you just got a job that came with a salary increase.

Work With a Dealer Lender

Dealerships tend to have relationships with almost every lender in your regional area. This means that there could be dozens of lenders that will offer terms that you find affordable. It is also possible to work with the dealership itself to create financing terms that you find acceptable. In many cases, the dealer could offer a lower interest rate or a loan term that allows you to avoid going upside down on a depreciating asset.

Just because you don’t have good credit doesn’t mean that you can’t get the reliable transportation that you need. By working with the right lender and being flexible with your down payment, it can be easier than you think to get approved and drive off with your preferred vehicle.