5 Tips for Getting a Car Loan With Bad Credit
There was a day when having bad credit meant that you could forget getting a car loan. Fortunately for those who have made some mistakes or hit some hard times, that isn’t as true now as it used to be. In fact, many people with challenged credit can get car loans – most, in fact. We see people every day who tell us up front that they don’t think there’s any way they can possibly get a car loan. And a significant percentage of those people drive off the lot with a new or new-to-them quality pre-owned vehicle. If you have bad credit, the first thing you should do is stop assuming when it comes to auto loans. After that, here are five things you can do to help yourself get that loan and get back on the road with a new car:
1. Try your bank – or, better yet, your credit union first. While car dealers absolutely love to handle the financing (and, in fact, we can often get it done even if the banks tell you no), you may be surprised if you talk to your personal bank. As long as you have an account in good standing, you’re in a strong position to negotiate with your personal bank. If you’re a member of a credit union, your chances are even better, as credit unions (which are owned by their members) are often more willing to take a look at your individual circumstances than banks are.
2. Be completely up-front with the finance professional. They won’t judge you. Financial institutions and car dealerships deal with people who have damaged credit every day. As a matter of fact, plenty of them have credit problems of their own (they’re normal people, after all, just like you). A good finance expert will have access to plenty of lenders that deal with a variety of credit situations. The more they know about your situation, the better they’ll be able to match the right lender to your situation.
3. Don’t hop from dealership to dealership. Shopping around is usually a good idea. Shopping around for a car loan if you have bad credit? Not so much. Here’s why – every time you apply for a car loan and the dealership runs a credit check, it is recorded as a “hard” credit check. Having too many hard credit checks in a short span of time can actually hurt your credit score even more – the last thing you need. Try working with a single dealer unless it becomes absolutely clear they aren’t going to be able to help you. If you have to switch dealers, consider waiting a couple of weeks at least.
4. The more you have to trade-in or put down, the better your chances. When you come to the table with a high down payment, it does a couple of things for you. First – and most obviously – it lowers the amount you will need to borrow, thus lowering a lending institution’s risk in lending to you. Secondly, it demonstrates to lending institutions that you have some assets. Lenders are more inclined to believe that you are able to make payments if you’re able to bring a significant part of the price to the table to begin with.
5. Explore in-house dealership financing options. In most cases, you’ll get terms if you can secure a bank loan. With that said, many dealerships do offer in-house financing for those who have circumstances that won’t allow for a traditional car loan. At the very least, it never hurts to ask if the dealership offers in-house financing. Learn more about McDonough Nissan’s financing options here.
Trying to buy a car when you have bad credit can be stressful. The good news is that, once you have secured financing, you have a great opportunity to start rebuilding your credit.