Bad credit is something that can happen to just about anyone for a variety of reasons. If you find yourself in this spot you may be wondering what the best ways are to go about financing a car loan. Here are seven specific steps you need to take to get a car loan with bad credit.
1. Pull Your Credit Report
This is something you need to do yourself. Credit.com states that checking your own score is considered a soft inquiry and doesn’t hurt your credit score. A hard inquiry is when you actually apply for credit. It’s also important to pull your own credit report so you can know for sure what your score is. It’s too important to take someone else’s word for it when it’s easy to get yourself.
2. Shop Around for the Best Rate
When you’re starting the process of financing a car loan you need to do your own research and look for the best financing rate. Your options generally include banks, credit unions, loan companies or the dealership. While some dealers may offer a good rate, Autotrader reports that dealers sometimes bump up rates to increase their profit margin.
3. Apply at Your Own Bank
Go to your own bank or credit union when looking for a loan. If you already have an account set up there, the bank may be able to negotiate a lower interest rate for your loan. Getting a loan through a bank you’re currently doing business with should make the entire process much easier than going through a dealership.
4. Consider a Co-signer with Good Credit
If you have bad credit having a co-signer can increase your odds of getting approved for a loan. Make sure the co-signer has good or at least better credit than you have. Having a co-signer who has already established good credit will give you a chance to rebuild your credit while also improving the likelihood that you’ll receive a lower interest rate for the loan.
5. Get Pre-Approved
Getting pre-approved for a loan provides several advantages. According to Consumer Reports, getting pre-approved allows you to compare interest rates that are available. It also makes the loan process easier since you’ll know before you actually start looking how much car you can afford. Just make sure you’re aware of any fees that may be involved.
6. Agree to Final Terms, Not Conditional
It’s important to make sure that the terms you sign for are not conditional or contingent. Friedman Iverson says this is when a dealer will initially say you’re approved for a loan. Usually in small print, however, the paperwork states the current loan is conditional. A few days after signing and driving home the car, the dealer may say the loan fell through and you’re required to return the car or sign a new loan at a higher rate.
7. Gather Necessary Documents
There are a variety of documents you’ll want to gather before attempting to get a loan. A few of these include pay stubs and utility bills. If you receive money from other sources such as child support or legal settlements you may want to bring these documents as well. You’ll want to provide information that will show you’re a good credit risk. Bring in three personal references, preferably from at least one employer or former employer. Finally, bring documents that will provide proof of residence and your driver’s license.
Finding a car loan with bad credit isn’t easy but it is possible. It’s important to be proactive and take all the necessary steps before looking for a car loan. ClassifiedAds.com lists a variety of financial services that can be useful when financing a car loan. Check out us out now for more information.