How to Apply for a Car Loan With Bad Credit: 13 Tips to Try
You can apply for a car loan with bad credit.
Tired of relying on your friends for rides? Well, they're tired of it too.
Yes, you can apply for a car loan with bad credit - and you can also apply for a car loan with no credit. You might not even need a cosigner for your bad credit car loan if you follow the tips below.
- KNOW YOUR FICO SCORE.
Multiple inquiries on your credit report lower your credit score. They also make you appear desperate for credit, which scares some lenders. You can find an article on how to raise your credit score, as well as obtain a free credit score report, here.
When you walk into a dealer, bring a copy of your credit report with you. This shows that you accept responsibility for your bad credit and are serious about the steps necessary to apply for a car loan with bad credit.
- BE PREPARED TO EXPLAIN ANY BLEMISHES ON YOUR CREDIT REPORT.
When you have bad credit, the auto financing department may want to know everything about your credit report. Don't lie to them. If you were broke because you worked at McDonald's, explain that you now have a lucrative office job. If you didn't pay your credit card bill for 6 months because you were in the hospital, bring in documentation to prove it.
You can't prove that you're a good person now unless you understand - and explain - the events that led you to apply for a car loan with bad credit.
- BE STABLE.
If you live on a mattress under the bridge, now is not the time to buy a new car. Stability is often a requirement for a car loan, especially if you have bad credit. Many lenders will want you to have lived in the same place for at least 1 or 2 years, as well as had the same job for that length of time.
- DRESS NICELY.
I'm not saying to wear a suit and tie, but try to look presentable. Nothing says "Please reject my car loan application" like a tattered tee with ketchup stains. If you can't afford to buy new clothes and keep them clean, you probably can't afford a monthly car payment.
- HAVE A HUGE DOWN PAYMENT.
Don't be fooled by commercials that say "$0 down, no interest for 48 months". I hate to burst your bubble, but those ads do not pertain to you. When you have bad credit, lenders will want more money from you-especially if you want to avoid a cosigner. Most lenders will require about 25% down.
- HAVE REFERENCES.
Be prepared to provide the name, address, and phone number of at least 3 people who know you well (and are willing to say nice things about you). Type a list up, and bring it with you to the dealer.
- ASK FRIENDS AND FAMILY MEMBERS TO RECOMMEND LENDERS WHO OFFER BAD CREDIT CAR LOANS.
Skip this step if you anticipate a lecture. You can buy a car without their help.
- AVOID "BUY HERE, PAY HERE" PLACES.
I could devote an entire article to this, but I won't (not yet, at least). Just trust me on this. You CAN get a bad credit auto loan from a regular car place. You'll just have to work a little harder to find one.
- DON'T BUY MORE CAR THAN YOU CAN AFFORD.
You're trying to repair or establish credit, not destroy it.
- IT'S OKAY TO SAY NO.
You have plenty of other options, even with your low FICO score. Never let a dealer bully you into purchasing a car.
- BE PERSISTENT, BUT NOT PUSHY.
When you have good credit, salespeople will practically fall to the ground and massage your feet. When you have bad credit or no credit, you have to convince them that you are just as important as any other customer who walks through the door.
- READ FORMS CAREFULLY BEFORE SIGNING.
Some bad credit auto loans have an "at risk fee" as high as $2000. Don't become another victim!
- IF YOU'RE STILL HAVING TROUBLE PURCHASING A CAR WITH BAD CREDIT, ASK THE DEALER'S FINANCE DEPARTMENT FOR SUGGESTIONS.
Dealers want you to buy a car, even if it's 6 months from now. Yes, they would prefer that it happens today (and so would you), but sometimes, that just isn't an option. If all else fails, sit down with the finance department and ask them exactly what you have to do to fix your credit. Many of them will give you detailed instructions on how to improve your FICO score enough to qualify for an auto loan with them.