Car Loans with Bad Credit: A Step by Step Guide for Applicationby Joie Gahum Digital Marketer
Need to buy a car but worried that your bad credit will get in the way? Find out how to work around getting car loans with bad credit.
Having a bad credit is one of the biggest obstacles when trying to get a loan. While most banks may not be in your favor, this doesn’t mean that you can’t take out a car loan. There are various ways of raising your chances for approval and getting a good deal despite a bad credit.
How to qualify for car loans with bad credit - step by step guide
Step 1: Check Your Credit Score
The very first thing that you need to do is to check your credit score. Verify your credit score if it actually shows bad credit. You could think you have a bad credit simply because you’ve overextended your finances and/or you are making overdue repayments, nevertheless it’s vital that you verify so that you don't decide based on presumptions.
It is free to check your credit score and it's fairly easy. You can check with the following national credit reporting bodies (CRBs) to verify your credit score:
Equifax Australia - formerly Veda): Equifax.com.au Phone: 1300 762 207
Experian: Experian.com Phone: 1300 783 684
Dun & Bradstreet: DnB.com.au Phone: 1300 734 806
Get Credit Score (new): GetCreditScore.com.au
You can get from any two of the national reporting bodies stated above and request for an easy to understand report or just take a clear screenshot of your credit scores. Along with your credit score, you'll have the chance to see and understand the factors that have the most effect on your ratings.
Step 2: Assess your situation
Are you financially ready? Having a bad credit doesn't mean that you are out of cash or resources. Prior to applying for a car loan, you have to honestly assess yourself - are you ready to manage the financial responsibility?
Calculate your monthly payments (estimate) using a car loan repayment calculator. These free applications can help you make a rough estimate of the monthly payments for the loan.
Consider the total amount you are going to pay for the car. This includes financing charges. Note that a longer loan term could decrease the monthly repayment. But the total payment spread through the life of the loan is higher when interests are included. Use an affordability loan calculator to see what you have to pay in total.
When availing a car loan with bad credit, the lending company may ask for a minimal down payment. When you put in a higher down payment, it means you can have more savings on financing costs.
Step 3: Find the right lender that suits your needs
Find a loan provider that welcomes applications from individuals with poor, bad, or limited credit ratings. These loan providers could be an auto dealership, your nearest local bank, other finance companies, and credit unions.
Looking around for the best auto loans in your area allows you to evaluate what various loan companies may offer. The CFPB (Consumer Financial Protection Bureau) recommends that loan shopping should be done within 14 to 45 days. This is to prevent further damages to your credit score. Applying for multiple loans through a long period can further damage your credit score. Note that some credit scoring models count inquiries made within the 14 to 45 period as one inquiry.
Step 4: Go through the pre-approval process
There's a great deal to consider when shopping for a car with bad credit, from finding the right car to choosing the right financing. But when you are able to get your loan pre-approved may reduce some of the stress. When you get a pre-approval, you can shop with confidence knowing that you understand terms of the financing, and concentrate on discussing an ideal price for the car.
Step 5: Find a cosigner or co-borrower with an excellent credit score
When you are able to get a creditworthy cosigner for your car loan, there is a high chance to get your loan approved and get better terms.
A cosigner can be your family member or your close friend. When you have a creditworthy cosigner, this provides a further guarantee to the loan provider since cosigners are equally obliged to meet monthly payments and even full payments for the loan.
Created on Jun 11th 2018 21:00. Viewed 2,323 times.