When your credit score has been damaged due to loan defaults or other financial misdemeanors, it can prove to be challenging to get even an auto loan. You should know what to expect when applying for a loan, and how to work around the obstacles to get the best possible deal. Some useful tips:
Review Your Credit Reports
Despite the law allowing free access to your credit report once a year from each of the three credit rating bureaus, most people rarely ask for a copy. As a result, they are unpleasantly surprised when their loan applications are turned down or they are offered sub prime interest rates. Accessing your credit report enables you to review it for any mistakes that can affect the outcome of loan applications.
Shop Around for the Best Auto Loan in a Window of 14-45 Days
While it is essential for you to shop around to get the best deal from various lenders, you will need to keep in mind that every time a lender makes a hard inquiry on your credit score, it results in damaging your already-poor score further. However, by limiting all your applications to a time period of a maximum of 45 days, all the inquiries are treated to be a single one so your credit score does not take multiple hits.
Find a Lender with the Correct Profile
When you know your credit score, you can avoid applying to lenders that have very strict policies and instead approach lenders that specialize in extending loans to applicants with poor credit. Often loans are easier to get from private finance companies, online lenders, and peer-to-peer lending platforms than banks or auto dealerships. A bad credit payday loan can be handy in case you want a bridge loan till your auto loan application is approved by a lender.
Figure Out How Much You Can Afford
Remember apart from the cost of the car, you will also pay for the registration and insurance charges apart from any add-ons like extended warranties and accessories. You can lower your monthly outgo by opting for a longer loan period; however, your interest expenses will be then far more. Increasing the amount of the down payment can lower the monthly repayment required.
Attempt to Get Your Loan Application Preapproved
It can get pretty dicey trying to get a good deal on both the car as well as the finance simultaneously. Often, really good deals on cars may be for a limited period that makes it impossible for you to get your loan approved in time. The best way of avoiding this kind of a situation is to have a pre approved the loan. When you know the amount that you are eligible for, you can focus on getting the best bargain possible.
Just because your credit score is less than ideal, it should not put you off from buying a car. Take care to find the best deal, get your loan pre-approved, and stick to what you can afford.