Bad credit can make it difficult to get an auto loan, but it’s not impossible. Here are a few things you can do to increase your chances of getting approved for an auto loan with bad credit:
1. Get a copy of your credit report and score.
Before you start shopping for an auto loan, it’s important to know where you stand. Get a copy of your credit report from all three major credit bureaus (Experian, TransUnion, and Equifax) and check for any errors. If you find any, dispute them with the credit bureau.
It’s also a good idea to get your credit score. Your credit score is a number that represents your creditworthiness, and it’s used by lenders to determine whether you qualify for a loan and what interest rate you’ll be offered.
You can get your credit score for free from a number of sources, including Credit Karma and NerdWallet.
2. Shop around for the best interest rate.
Interest rates for auto loans vary depending on the lender and your creditworthiness. If you have bad credit, you’ll likely be offered a higher interest rate than someone with good credit.
That’s why it’s important to shop around and compare rates from multiple lenders before you choose one. You can use an online tool like Credible to compare rates from multiple lenders at once.
3. Get a cosigner.
If you can’t qualify for an auto loan on your own, you may be able to get approved if you have a cosigner. A cosigner is someone who agrees to be responsible for the loan if you can’t make the payments.
This can be a good option if you have bad credit but expect to improve your credit score in the near future. Just keep in mind that if you default on the loan, your cosigner will be on the hook for the payments.
4. Consider a secured loan.
If you have bad credit, you may be able to get a secured loan. With a secured loan, you put up collateral, such as a savings account, to secure the loan. The benefit of a secured loan is that it’s easier to get approved because the lender has less risk.
The downside is that if you default on the loan, the lender can take your collateral. So, you’ll want to be sure you can make the payments before you take out a secured loan.
5. Look for a lender that specializes in bad credit loans.
There are a number of lenders that specialize in loans for people with bad credit. These lenders are more likely to approve you for a loan, but they may also charge higher interest rates.
Some lenders that specialize in bad credit loans include Capital One, Credit Acceptance, and Carvana.
If you’re looking for an auto loan but have bad credit, follow these tips to increase your chances of getting approved.