When you have bad credit, it’s harder to get approved for a car loan and the interest rates are usually higher than those with good credit. However, there are lenders out there that specialize in helping consumers with subprime credit get a new car loan. These lenders know that even people with poor credit have some sort of income, so they take into account things like how much you currently pay for rent and utilities when deciding on your interest rate.
If you have bad credit, there are some things you can do to help boost your score before applying for a car loan. Making payments on time, keeping your debt-to-income ratio low and getting approved for a secured loan all help with building your credit score. Once you know which lender is the best fit for your needs, read on and we will help you find the perfect car loan for bad credit.
What to look for in a car loan for bad credit?
More than anything, you want to find a lender that understands you have bad credit and won’t try to charge you an arm and a leg in interest rates. The best car loan for bad credit may not be the lender offering the lowest rates but the one that is willing to work with you and your situation.
First, start with how long the loan term is. Buyers with bad credit can qualify for longer loan terms but they also come with higher monthly payments. A longer loan term can help lower your monthly payment, but it’s important to understand how much you will be paying overall.
When it comes to the interest rate, make sure to ask how they calculate it. For example, if you’re approved for a 72-month car loan and the interest rate is 5.99%, that actually works out to an APR of 6.02%. So, don’t just look at the interest rate, but also the APR.
Loan Basics: Repayment Period and Rate
The most important thing to keep in mind is the length of the repayment period. It takes time for your credit score to go up, so you can opt for a longer repayment period. This will lower your monthly payment. On top of your payment, you must also pay interest on the loan. The interest rate on your car loan depends on your credit score.
The higher your score, the lower your interest rate will be. It’s also important to look at your credit history when determining your interest rate. Consumers with no or limited credit history usually pay a higher interest rate. So, make sure you have an accurate and updated credit report. If there are errors or missing information, you should work to fix them as soon as possible. You may be able to negotiate a lower interest rate.
Many car dealerships work with lenders that specialize in people with low credit. The lenders may have access to special interest rates just for car buyers at the dealership.
Which Lenders Offer the Best Car Loans for Bad Credit?
Several car lenders specialize in those with bad credit. However, just because a lender specializes in subprime loans, doesn’t mean they are the best choice. Some of the best car loan lenders for bad credit include Auto Finance Center, People’s Choice Financial and Rapid Finance. All of these lenders offer car loans with low-interest rates, long repayment terms and easy online applications.
Rapid Finance even offers a car loan calculator to help you estimate your monthly payments. This is a great option for people with bad credit because they will work with you on the payment amount and length of the loan term. On the other hand, Consumers Advances notes that they do not offer car loans to people with bad credit. However, they do offer a car title loan with low-interest rates, a short-term payment plan and the option to pay off your loan early.
Tips for Getting Approved With Low-Interest Rates
First, make sure your payments are on time. Having at least one late payment in the past 12 months is one of the main reasons why people with bad credit can’t get approved for new loans. Make sure your payment history is accurate. If it isn’t, work to clear it up as soon as possible. Keep your debt-to-income ratio low. This is the amount of debt you owe versus how much you make per month. The car loan lender will want to see that you have enough disposable income to make your payments. You can do this by paying off debt, like medical bills or credit cards, and increasing your monthly income.
Final Words: Is It Worth the Hassle?
If you have bad credit, you might think it’s impossible to get approved for a car loan. However, there are still options available to you. The best car loans for bad credit are long-term ones, have low-interest rates and allow you to make payments online. Almost everyone who applies for a car loan with bad credit will be approved.
But, the terms of your car loan may be much more strict. You may be required to make a larger down payment, have a shorter repayment term or get a higher interest rate. The best thing to do is shop around for different lenders to find the car loan for bad credit that works best for you.