Bad credit can get in the way of getting an auto loan. However, thanks to recent developments in auto financing, people with less than perfect credit history can now buy their dream car. If bad credit is all that’s stopping you from owning a new ride, then you may want to negotiate with car dealerships that help with bad credit.
Car ownership is not a problem even with your bad credit record. You just need to do several things to increase your chances of securing an auto loan approval.
Offer a large downpayment
For large purchases, it is natural for most buyers to seek financing options that let them pay as little down as possible. But with a bad credit history, the process for purchasing your desired car is not exactly natural. A large down payment means shorter period for you to pay off the loan. For lenders, it means reduced risk as you are less likely to default on your loan after paying up a huge downpayment.
Expect to pay high finance fee
Because of bad credit, lenders may consider you a high-risk borrower. You will need to pay high finance charges as a result. The bank may eventually offer you a refinancing deal once you improve your credit score.
Get a co-signer
A co-signer can increase your chances of getting loan approval. Most car dealerships that help with bad credit allow a cosigner as it further reduces risk. With more than one person responsible for the loan, there’s a better chance of repayment. This means that if you fail to meet the monthly charges or any other fees associated with the loan contract, your co-signer will take your place and fulfill the loan terms. A family member or a friend is the usual choice as a co-signer but it could also be anyone who is willing or capable of assuming the repayment obligation if you fail to continue with the repayment.
Search for car dealerships that work with bad credit and inquire about their process. Once you get the loan approval, be aware of the schedule of your payments. Always pay on time as this helps improve your credit history and allow you to secure a better deal with lower interest rates in the future.