How to get car loan with bad credit?

Car Loan

With bad or challenged credit rating you are more likely to get rejected for car financing or money borrowing. If you seriously believe that you have already tried all your options, you should, this time, try to get car finance for low credit score online. Why online ? Because there are lenders available online specializing in providing financing to customers with bad or low credit score history. What makes it important to you personally is that you can drive away in your own new car even if you believed that no lender would offer you having a car loan.

Smart ways to get car loan with low credit scores

There are many car dealers advertising to finance for buyers with bad or low credit scores or no credit at all. It is very much possible for people with less than ideal credit score to get a car loan or financing but due diligence is required to make sure that the terms of financing are affordable. There are some key factors one with low credit score needs to keep in mind while looking for car loans opportunities.

The first thing a person with poor credit rating should consider is to find out exactly how bad or low his/her credit score really is. Generally a score of 650 or above usually generates credit risk flag in Canada whereas less than this number puts the borrowers in the sub-prime category and that often effects interest rates. Poor or low credit means higher interest rates. People can usually access their credit rating reports or scores from various Government agencies and bureaus. For example people in Canada can access these reports from Equifax Canada and TransUnion Canada, the country’s two credit bureaus.

Low credit rating is not always bad

Sometimes people are able to get lower interest rates even with low or credit rating merely by putting more money as down payment. From 10% onward down payment is usually considered enough to access more favorable terms. That means if someone having credit rating of less than 650 can put $1,500 as down payment for a car worth $15,000.

Another way to reduce interest rate is to having a family member or friend with good credit rating as co-signer. This is however sometimes difficult to find such a person and convince him to co-sign because the co-signer has to undergo credit check and should agree to serve as a guarantor incase of failure to repay.

People with bad or low credit usually end-up with paying much higher interest rate sometimes way upto 10% as compared to people with good credit score that usually pay 3-4% only. Auto financing with more than 10% interest rate should not be considered anyway. You should do online searching a bit more aggressively and you will surely find someone offering better deals.

Always calculate interest rates carefully!

Before jumping into any deal or signup any contract do your math properly because sometimes the terms look very good and soft at first whereas you end up paying much higher rate down the road. So do your calculation properly and ask about every small detail and numbers carefully. A no-deal is much better than a worst deal. You should be aware of interest rates and what you can afford and stick to that price range. Try to make your calculations on target purchase price based on the total amount you will expect to pay, not the monthly payment you can afford. Monthly basis often means agreeing to pay longer loan terms with much higher rates which is not usually a good financial strategy which looking for car loan.

Proof of good good timely payments of utility bills and other obligations usually earn good reputation even though you have a bad or low credit score. So bring copies of all recently paid stubs, utility bills and other documents that prove your ability to generate income and pay back dues and debts in time.