Do you want to finance a vehicle but think that you may not pass the credit check? Do not get discouraged because you can still get a car loan with bad credit if you look in the right places. There are several resources available that lend money to people with a less than perfect credit score.
You simply need to know how to get auto lenders to trust you again. Below are seven helpful tips for increasing your chances of getting the car loan that you need.
Pay Your Bills On-time
If you have a terrible credit profile because of late or missing payments on the debts that you owe, then do not be late on your payments ever again. Start building up your credit history by paying your bills on time from this point forward. If you need to eliminate certain expenses or luxuries, such as mobile service or the internet, then so be it.
Just make sure you can afford the debts that you presently have. If you cannot get approved for a car loan right now, work on improving your credit score first and you may get approved for the same financing next year. You just need to show a positive track record of paying bills on time.
Consolidate Existing Debts
The more credit accounts that you open, the more you make lenders nervous because there’s a high possibility of you getting overwhelmed by repayments. If you owe money to more than two different creditors and you have bad credit, then you cannot expect an auto lender to approve your car loan application easily.
For this reason, it is a good idea to consolidate your existing debts so that you only owe one creditor instead of several creditors. Apply for a consolidation loan to make this happen.
Don’t Apply for Any Other Credit
This tip coincides with the last one. After you consolidate your debts, do not apply for any more loans or credit cards. The only loan you should be thinking about is the car loan. If you don’t get approved for a car loan, then do not apply for a credit card and think that’ll help boost your credit rating in the future.
The best thing you can do in this situation is to make payments toward your existing debts for more than six months. If you can do this without missing a payment or taking out any other loans or credit cards, your chances of getting approved for a car loan increase.
Request Updates to Your Credit Profile
Make sure your credit profile is up-to-date. For instance, if you just got divorced or paid off past debts, then your credit profile needs to reflect this. You cannot always rely on creditors or court clerks to send these updates to the major credit bureaus. Sometimes you need to contact the credit bureaus directly and show them proof of your divorce and payments. Once they receive the documentation, they will make the necessary changes to your credit profile.
Maintain Your Employment History
Auto lenders need to know that you can hold down a job. If you have consistently worked for over a year and can provide pay stubs to prove it, then this will go a long way with most lenders.
A stable employment history shows lenders that you will likely be able to afford the monthly payments on the loan.
It always helps to save money before you take out a car loan. A down payment of a few thousand dollars is enough to convince a lender that you’re financially viable.
Someone with bad credit should always have money saved because lenders rarely ever approve car loans with no down payment if the applicant has bad credit.
Seek Out a Bank Pre-Approval
Your bank knows more about your financial status than anyone else. Seek out a loan pre-approval at your bank and see what happens. They have firsthand knowledge of your current assets and finances, so you are more likely going to get that pre-approval for a certain amount of money. Then you can use that pre-approval to purchase a car that falls within the specified amount.