Poor Credit Car Finance

A poor credit car finance is something that is feasible, yet not the best idea due to the exorbitant interest rates and other fees you’ll end up paying at most banks. Many times, the only kinds of lenders that make available car loans to people with poor credit are what are called “bad-credit’ or “sub-prime” car loan lenders. A poor credit car finance is in fact within you reach at most of these lenders, but the real question is would you really want to accept such a loan with such awful terms? The answer should be no because even if you have poor credit there are a number of things you can quickly and easily do to improve your credit situation in order to get approved for a car loan at a good rate and with proper terms.

So you know you have poor credit, well this can actually be a good thing because most people don’t even know what their credit status is or what their credit score is. Getting a car finance loan with a good interest rate and terms is going to require a credit score that is at least considered to be fair. This means that you are going to have to get your score above a 620, and this actually isn’t that difficult as long as you know what steps to take. Typically people who have really low credit scores can make only a few changes for their score to jump upwards of fifty to hundred points fairly quickly. The things that really hurt a credit score include any bankruptcy marks, any late payments, any defaulted accounts, errors on the report, and a bad debt to credit limit ratio. Most of these things can be fixed without much effort on the part of the individual so that they can take their credit from poor to fair in short period of time.

There are a number of different factors that play into getting approved for a car loan, and the major ones are your credit, your income and employment history, and the cash you have for a down payment or whether you have a trade-in vehicle. After you now have your credit back on track, you should then be looking at your income and employment history. Although you can typically find a car loan no matter if you have poor credit, if you don’t have some kind of income that can be shown to lenders you probably won’t be able to get approved by anyone. Lenders like to see that you’ve had a consistent income for at least two years, and it is a standard requirement that you provide either your W-2 or similar tax document, or your pay stubs dating back up to two years so that the lender can verify your income. Some sub-prime lenders don’t need a history for the full two years, and some may even require only a six-month history, but these lenders are few and far between.

A lender will look at your income level and employment history and then also ask for a listing of your monthly expenditures. They will then determine if you have the money necessary for the required loan payment, and sometimes they use a metric called a debt to income ratio to make a quick assessment of this. The best things you can do to improve this area of your application is to make sure that you can prove you’ve been employed for at least two years prior to applying, and that you make enough money to afford the payment specified in your car loan. Most lenders will not mind if you were out of work for a month or so during those two years, as long as you can show them you got a new job and that you are currently employed.

Once you have your income and employment situation squared away, there are still more things you can do to improve your overall application. These things are relevant especially if you still have poor credit and cannot seem to get your credit score out of the gutter. One of the other things you can do is put away enough cash for a nice down payment, or make the determination to trade in your current vehicle. The more value either of these has in the eyes of the lender, the better overall terms you’ll receive, and the better chance you’ll have at being approved. If you still have poor credit and don’t feel good about the rest of your application you can try and locate a creditworthy cosigner that is willing to cosign on your car loan. A creditworthy cosigner can compensate for many other areas that are not up to par on your application, and as long as you still have an income, a cosigner can virtually guarantee that you get approved for your car loan.

Now that you hopefully have your application in order, it is now time to locate the financing for your car loan. If you haven’t improved your credit, and you still have poor credit, the best place to look is online for either a “bad-credit” or “sub-prime” lender. When you do find such lenders, you must verify that they are a reputable company before you submit any information to them, as there are quite a few scams online that target people with bad-credit and are seeking financing for something. As stated previously, these lenders will probably be willing to work with you, but it will cost you in the form of a very high interest rate and a number of fees.

If you have made some improvements to your credit and overall application, you should then have many more options than purely sub-prime lenders to get your poor credit car finance loan. Depending on whether you are buying a new car, used car, or refinancing your current auto loan, you can apply for financing at a dealership, a local bank, a national bank, a credit union, or an online lender. Most of these provide fairly similar services, and it is wise to look around before resorting to utilizing the financing that your dealership provides. If you do opt for dealership financing, just be aware that dealerships often try to push terms onto a person that might be inappropriate for that person’s situation, and many times it is difficult to work with a dealership to change such terms, as there are often several intermediaries involved. Shop around as much as possible at your local banks and credit unions because often times these institutions have deals tailor made for individuals that have just made some improvements to their credit. Compare and contrast as many quotes as possible, and in the end you will be able to find that car loan you need even if you have poor credit.