Contrary to popular belief, getting a car loan is easy, and in some cases can be especially easy for people with bad credit. This type of loan allows consumers to pay their vehicle off in monthly installments instead of having to completely pay for it up front. For most people, a car loan is extremely welcome since paying cash to buy a new car is not a possibility.
With a car loan, the financing company or bank gives you the money to purchase a vehicle for personal use. The loan is secured against your new automobile. Car loans are also referred to as consumer loans or secured car loans.
Can You Get a Car Loan With Damaged Credit?
Having bad credit certainly doesn’t mean that you can’t get a car loan with monthly payments that work with your budget. Conditions vary from one lender to another. If your credit score is borderline, some financing companies might still give you a loan quickly and easily. As evidence of this, new car loans for subprime borrowers jumped 22.4 percent in 2012 compared to the previous year. Even those with credit scores in the range of 500 to 600 can often acquire a car loan.
Your credit history, the information in your credit application, and the amount of your down payment are some of the main factors lenders look at when considering you as a potential borrower. Lenders divide your credit history into two categories: habitual and situational credit. A consumer with habitual credit may not be approved for a loan. If approved, they might pay an interest rate as high as 25 percent. Situational credit involves someone who makes timely payments but is derailed by an illness, work accident or other unexpected event, and it is viewed differently by lenders.
If you have bad credit, it’s important to be realistic about the car you are planning to take out. While you may be able to get a loan, you will pay more to obtain it than someone with a better credit score will. You are considered to be a subprime borrower if your credit rating falls below 620. Subprime borrowers do not qualify for the best loan offers.
Apply for a Car Loan
Many lenders specialize in giving loans to customers with less-than-perfect credit. Getting a car loan with bad credit is not as difficult as it may seem. Before you apply for a loan, review the current state of your credit. Credit bureaus often make mistakes that ruin individual credit ratings. For this reason it is recommended that you check your credit report on a regular basis. If you find any inaccuracies, report them immediately.
Shop for the best interest rates through lenders that specialize in subprime loans. In fact, if you have less-than-stellar credit, most conventional lenders will refer your loan application to a subprime lender. You can even apply for a car loan online. Although subprime rates may be higher than prime rates, at least you will get the money you need to buy a new car. And remember, a car loan can also help improve your credit score.