Today, bad credit has become the bane of society as a whole; most banks are wary of providing loans to people with it. However, this does not mean that they do not approve any loan. No doubt, a good credit score is necessary for availing a loan, be it auto or home, with favorable terms and conditions, but even if you don’t have a good score, it is possible to get auto loans. However, in this case, the interest rates may be high, and you may need to pay a higher down payment. On a positive note, these loans can be a great opportunity to improve your credit ratings, and over time or refinance the loan with favorable terms.
How to Get One?
Due to your past financial problems, it may be difficult to get approval for an auto loan. But then, if you have a stable income now, and you want to improve your credit score, then one of the best options is to go for bad credit car or motorcycle financing. You need to speak with a reputed car agent so that you know the options available. Make sure that you carry along financial documents like bank statements, pay slips, etc., which will give the dealer a clear idea of your financial situation, and the amount you will be able to pay each month. There are bad credit car loans with no money down; so, get the details of them, as well.
Whether it is a bad credit car or motorcycle loan, the interest rates are bound to be high. However, after making regular payments for sometime, you can always go for the refinancing option with lesser interest rates. Moreover, with the competition heating up, the chances of you finding a better deal are high, if you search for them. If you finally decide to go for such a loan, be ready to pay a higher down payment, as paying it means that the lender will lose less, in case of a default. Moreover, it also reduces the amount you pay each month, thereby giving you the option of paying less every month. Usually, the repayment term of an auto loan is 60 months, for a person with good credit rating. However, it is lower for a person with very bad credit, and this period ranges from 24 to 48 months.
If you have very bad credit, but still want a longer payment duration, with a moderate interest rate and lesser down payment, then a co-signer is required. Get a relative, may be parents or spouse, who has a good credit score to co-sign on your loan document. Having a co-signee gives the bank a guarantee that their money will not be lost, and at the same time, provides you with a chance to improve your credit rating. Getting parents to co-sign the application is especially helpful for students, as they have a great chance of building a good score, by making on-time regular payments.
Another option for getting approval is to go for a secured loan. In such a case, you will need to provide collateral as security, which may be repossessed in case of a default. Alternatively, you can also opt to lease a car, if you have a steady income, and are unable to pay such high down payments. You need to pay rent for using the car, and if you want to buy it at a later date, you can do it. Making on-time payments also provides you with a chance to improve your credit history, which would benefit you, in the long run.
Thus, there are several options available; however, you need to remember that you make payments on time so that you can avail better benefits later on. Before signing on the dotted line, remember that you go through, and understand all the terms and conditions so that you know the amount you are expected to pay.