It may seem like anyone with bad credit has a bulls eye on their forehead when it comes to looking for auto loans for people with bad credit. You just know that finding a loan will be challenging enough but if you do find a loan you’ll have to pay big when it comes to your interest rates.
Still, what can you do? You need a car to get you around and to and from work. I found myself in that exact situation a few years ago. After a particularly nasty divorce my credit was ruined. I was driving a ten year old car (it was extremely reliable though and I really loved that old car) that just started to need too much maintenance. I simply couldn’t afford to keep it any longer.
I didn’t have any money saved, well not enough for a car anyway, but I needed a car. So I threw caution to the wind and went to a local car dealer to see what, if anything, they could do. I was very surprised and impressed that they were able to work out financing for me on a very nice used car.
My monthly payments were something I could comfortably afford and I had a car that I knew I could count on. The dealership even offered a short term warranty of my ‘new’ used car.
The only problem was that my interest rate was insane. Rates for people with good credit were around 5% but mine was over 20%!! How was that even legal? But what could I do, I needed a car.
The good news is that I made all my payments on time and after only about 6 months I was able to improve my credit score enough to sell that car and buy myself a brand new car. My interest rate still wasn’t the absolute lowest it could have been because I still didn’t have perfect credit, but it was much better than my first auto loan. I was moving forward and improving my financial situation… and I had a new car too!
If you find yourself in the situation where you need a new car but have bad credit here are some other tips that might help a little;
1. Don’t limit your search for a loan to only your local bank. You can often find better deals with an online bank. No matter what, don’t limit yourself to only one or two lenders.
2. Do anything and everything you can to improve your credit score before you start your search. Sometimes you may even be able to find a mistake or two on your credit report and that can increase your score almost immediately.
3. Try to come up with at least a small down payment. That will let the lenders view you as someone who does have some resources even though your credit is bad. It will also mean you’ll have to borrow less which will make you more attractive to the lender.
There are such things as auto loans for people with bad credit, it just takes a little more time and effort to find them.