You might be all ready to see yourself behind the wheel of a shining new car, with all the latest upgrades; all research is done and dusted with the model decided, confident of obtaining a car loan, and then your spirits are dampened by your bad credit.

Low credit is defined as a score under 629. Convincing a lender for a car loan on a bad credit score is a tough job and rightly so, as the lenders are more inclined towards people with a good credit score (that is higher than 740) and have an excellent past record of loans and payments, as they’re more likely to make timely payments. History of bankruptcies, late or pending payments, identity thefts, and even refused loans serve as red flags for a potential lender. They can seriously get in your way of getting favorable terms.

But all is not over yet. With the right amount of smart tweaking and research, you can be a ‘loan’ away from your dream car.

1. Clean Up Your Credit Report


Get hold of your free annual credit report, even though you’re sure that your credit score is low. The smartest thing you can do is rigorously go through your credit report many years well in advance of buying a car. This will help you keep it clean and good.

Your credit report is the single best indicator of your authenticity and reliability to the lender. Make sure you clear any overdue payments/debts, clear up any offending issue, and temporarily check on any other loans you plan on getting. Also, get rid of any joint accounts which may be reflecting negatively on your credit score.

Take this report along with you in your next meetup with the lender to explain the reasons for any past bad instances and increase your chances of securing a reasonable deal.

2. Research Smartly

It’s a pretty good strategy to have a look around at different lenders and see what they have to offer for bad credit. It’s not always a bad idea, as the lenders might react differently to two same persons with the same score. Rather than delving formally into the procedure, it is best advised to do your homework wisely beforehand to get an idea of what each lender is looking for. If you qualify, remember – if you formally apply for a loan with many lenders, each one will run a detailed credit check, and this will reflect a fall in your credit score every time, which you can not afford a time like this. It’s best to keep your search limited to two weeks.

3. Approach Your Bank or Credit Union


Before formally approaching lenders, it may be best to try your luck with your bank or credit union. If you are lucky and hold a great relationship with your bank, your bank might pre-approve a loan. Otherwise, credit unions might do the job too. Additionally, it may be worthwhile to look up some online lenders as well, as sometimes, they offer a competitive deal.

4. Steer Clear of Sub-Prime Lenders and Scammers

Be wary of sub-prime lenders. Their offer might seem lucrative for bad credit score people, but their unreasonably high-interest rates might do you more harm than good. Also, keep an eye on the paperwork before signing it off and make sure all verbal claims match the written version. Many scammers claim something else and make you sign on something else.

5. Bring a Friend to Co-sign


This can be a lifesaver for all the people with bad credit, as bringing a friend to co-sign your car loan document essentially boosts your application (also credit score) in the eyes of the lender and gives him confidence and security in case you fail to pay on time in future (your friend pays in such instance). You might get lucky with more favorable lending conditions. Make sure only to go this way if you’re confident that you’ll be able to pay on time.

6. Prefer Shorter Loan Period Over Lower Monthly Payments

Lower monthly payments extended over many years might seem tempting, but the interest rate over all those years adds up to a very high total. Consider getting a shorter period loan, which will have a much-reduced interest rate; you will save a lot more than you think about your overall car cost.

7. Make A Bigger Down Payment


Consider paying a bigger down payment to reduce further your interest rate and the amount you need as a loan. If you plan on getting a car loan in few years, it is best to start saving early for a down payment, as a more significant down payment will get your loan approved far more quickly and easily.

8. Cut Down Your Expectations And Embrace The Reality

A bad credit score won’t get you a big loan, so it will be much more practical to actually sit down and think hard about your car choices and how the cost can drastically differ from model to model. It is no time to think of the latest model tweaks and upgrades, as getting a functional car must be your first priority. Unrealistic expectations will get you nowhere and certainly won’t get you a loan. If it sounds difficult to compromise on your car choice or there is no urgent need, it would be wiser to wait for some more time and improve your credit score.

Closing Word


Getting a car loan with bad credit is no easy task, but making your way along the details explained above smartly might get you behind the wheel sooner. Also, it may be appropriate to mention that as soon as you accept the offer of a car loan, make timely payments and grab it as an opportunity to boost your credit score for any future financing. You can visit here for further guidance and more tips on car financing on bad credit and improve your chances of securing a car loan with bad credit.