You will find yourself with limited home loan options if you have less-than-perfect or bad credit. Since car loans are smaller and use a collateral — repossession of your vehicle if you default on your loan — you can find deals from various lenders, even reputable dealerships, that finance bad credit.
Look Around for the Best Deals
Know that each lender will treat your credit rating differently. A particular lender may offer you a high interest rate, but this doesn’t mean others will follow suit.
Find another lender if this happens — a car dealer, a bank, or a credit union — and listen to what they have to offer. Before you choose, Malco Motors reminds that the lending company or dealership should be a member of the Better Business Bureau and other professional organizations.
Know your Specific Credit Score
Don’t take the lender’s word for it — look up your credit score. According to FICO, borrowers with a score between 620 and 659 get an interest rate of 9.7%, while those with scores between 500 and 589 get 15.4%.
Shoot for a Shorter Car Loan Term
Don’t just look at the monthly payments. Consider the overall cost of the car. Know that some dealers will offer you the lowest monthly payment so that you’ll be swayed in getting a longer term that will profit them.
Go with the shortest term you know you can manage even if it comes with a higher interest rate. Just be sure to budget wisely so you don’t default on your loan and end up losing your vehicle.
Be Wary of Extras
These extras come in the form of car insurance, extended warranty, as well as security systems and rustproofing. Go ahead if you have the cash and you feel that you really need these, but keep in mind that these add to your overall interest rate.
Get a Co-signer
Find someone with good credit to co-sign a deal with you so dealerships that finance bad credit can factor in your co-signer’s credit rating when determining your loan terms.
Your bad credit rating shouldn’t stop you from getting your dream vehicle. Look at your options and ask for advice. Even a friend’s opinion on a car dealership can help you find better loan terms.