While it's hard to build good credit, bad credit can occur from one poor decision. Getting loans is not easy when your credit is bad, but there are options. If you need a car loan, here are some tips that may help you find the best loan for you.
Consider Buying a Brand New Car
According to Edmunds, dealers might be more likely to approve a car loan to a person with bad credit if the person purchases a brand new car. Dealers offer this simply because the value of a new car is much higher than that of a used car.
When the dealer gives the loan, there is a lot of depreciation built into the loan. If the borrower defaults, the dealer may be able to recoup most of the costs. This helps the dealer prevent losing as much money on a higher-risk deal.
AutoTrader reports that lenders often offer lower rates on new cars than on used cars. With the better chance of getting a loan on a new car and with the opportunity to get a lower rate, choosing to buy a new car might be the better route for you to take if you have bad credit.
Get a Co-Signer
There are plenty of ways to find car loans, even if you have bad credit, but it can still be hard to find a loan with decent terms. If you can only find high interest loans and are not willing to accept any of these, find someone to co-sign for you.
A co-signer on your loan can have a huge impact because this person takes on the responsibilities of the loan. Using a co-signer's good credit can make a huge difference with the loans you are approved for.
Choose Shorter Terms
Certain websites allow you to apply for auto loans, and your application is sent to hundreds of different lenders. These lenders have the option to offer you a loan, but you have the freedom to choose the loan you prefer. If you use this method, compare the terms carefully.
As you do this, you are likely to see that shorter-term loans generally have lower interest rates. If you can afford to make the payments on a three-year loan versus a five-year loan, you may end up:
- With a lower interest rate
- Saving a lot of money on the total loan
Payments on a three-year loan will be higher than the payments will be on a five-year loan if you compare the same loan amount, and you should make sure you can afford the monthly payments if you choose a loan with a shorter term.
Apply At a Credit Union
Credit unions are similar to banks, but they are also very different. One of the main differences is that credit unions are owned by the people that use their services. They are non-profit organizations and they pass their profits back to their customers. This is why credit unions generally:
- Pay higher interest rates on savings accounts
- Offer lower interest rates on loans
If you try these methods and are still having trouble finding a loan, you could always click here or shop for a car at a bad credit car dealer.
Shop At a Bad Credit Car Dealer
Bad credit car dealerships are known for offering loans to almost anyone. You could have horrible credit and still get approved for a loan; however, the loan terms might not be exactly what you were hoping for.
This is a great option for anyone that really needs a car, and you can find a large selection of different vehicles at a bad credit car dealer.