Bad Credit Auto Loans Online
You can get an auto loan with bad credit
If you have a low credit score but are wanting to get an auto loan, there are bad credit auto loans online that can help anyone get approved for a car loan. In today’s circumstances, there are a lot of exceptions being made in underwriting that have allowed many qualified buyers with bad credit to get approved and into a new car. In some cases, you can even get preapproved before you find the car you want to buy.
Your financial situation is unique, so take some time to understand where you are. Also, what you’d like to accomplish, and the best way to do so. Here are some important considerations that may help you in the process as well as understanding more about bad credit auto loans online.
1. Do Your Research
You may already have your eyes on a specific vehicle you’d like to buy. However, you don’t want to bite off more than you can chew. Take some time to review your budget, what you can afford, possible changes in auto insurance, and of course your credit history. This backwards approach may not be as fun, but it’s definitely the smarter way to go!
2. Review Your Credit
A lot of factors are considered when a loan application is presented to a loan company. This is especially true for someone with poor or bad credit. Most lenders will rely partially on credit score. It’s obviously not the only thing lenders look at, but it has a significant impact on whether you get approved or not. Also what the terms of the loan will be, especially interest rate.
It’s also a good idea to review a copy of your credit report from each of the three reporting agencies (Experian, Transunion, and Equifax). Look for any mistakes or inaccuracies so you can contact them to make corrections. This is an easy way to help improve your credit score.
3. APR (Annual Percentage Rate)
An APR is the interest rate a lender charges you. The rate you will get depends on your current credit score, any meaningful items on your credit report, your monthly income, the length of the loan you’re requesting, and the vehicle you’ll be financing. An amortization schedule will be created based on the principal, interest, and loan term. That calculation will determine the amount of your monthly payment, which includes principal and interest. This is different than the APR on credit cards, which simply multiplies the APR (divided by 12) by the monthly balance and applies a finance charge.
4. Loan Term
Loan terms are generally referenced as the number of months you will be making payments, assuming you don’t pay it off early. Sometimes you may see a loan term in years, not months. Some lenders will allow you to get a loan for as much as 84 months, which will greatly reduce the amount of your monthly payment.
However, it’s important to realize how risky it may be owing money on a vehicle for a full seven years. When you owe more money on the loan than the value of the vehicle, it is called being upside down. If you wanted to sell it, you would not be able to get enough to pay off the loan. Also, considering the fact you will end up paying interest for seven years, you will end up paying a lot more for your vehicle than with a shorter loan term. Even though a shorter term loan will have a higher monthly payment, you will pay off your loan a few years earlier, thus reducing the likelihood of being upside down. Shorter loan terms also have lower interest rates.
Therefore, it is a good idea, if at all possible, to try and finance a new vehicle for 60 months or less, and a used vehicle for 36 months or less. If your credit is good enough, you may be able to negotiate the term and APR with the lender.
5. Down Payments & Trade-ins
If you walk on to a dealership with a low credit score, you are automatically at a disadvantage. You won’t be able to take advantage of some of the sweet deals like 0% interest and automatic rebates, etc. However, this doesn’t mean you can’t get approved for an auto loan. If you have some cash saved up for a down payment, or a used car to trade in, this could help you. First, by reducing the amount you are asking to borrow, you would immediately have equity in the vehicle. This would make lenders more likely to loan you the money.
6. Using a Cosigner For Your Auto Loan
If you find a friend or family member who has good credit and is willing to sign the loan with you, it could make it a lot easier to get approved. Some lenders may require it if your credit score is too low. A cosigner is essentially a backup plan to the lender in case you are unable to repay the loan. If you miss a payment or can’t pay the loan anymore, the cosigner is responsible for doing so.
7. Filed Bankruptcy? No Credit History?
A lot of people who previously filed bankruptcy or don’t have any credit history think they won’t be able to get an auto loan. However, some lenders specialize in approving bad credit auto loans, such as our partner Auto Credit Express. They will approve auto loans for all types of credit. As previously mentioned, a down payment, trade-in, or cosigner may help put you in a more favorable position too.
8. Finding a Dealership or Vehicle
One suggestion before finding a dealership or vehicle you like is to go ahead and get preapproved online for an auto loan. This will allow you to immediately begin the financing process after you find the vehicle you want. You can search local dealerships’ inventories, or you can buy through a private party. Either way, it’s best to go in knowing you’ve already secured your financing.
What Is Right For You?
If you take all of the above in to consideration, you’ll have a better idea of what your unique situation is and the best way to proceed, especially if you need money now. It’s important to realize there are MANY lenders who will approve you for an auto loan if you have bad credit. The best thing is to apply through a company who has a huge network of bad credit lenders because it greatly increases your chances of getting approved with favorable terms.
Apply For a Car Loan
You can get an auto loan even with bad credit! Applying online takes just a few minutes. It’s free, and you’ll get an instant decision.
Mike Lombardi, MBA
Personal Finance Expert
Mike Lombardi earned his bachelor’s degree in Finance, as well as his MBA in Economics. He has been in the personal finance industry for 24 years. He spent 12 years working for a large bank as the loan operations manager before switching gears and managing client portfolios at a small wealth management firm. He enjoys helping people develop and implement a personal budget, formulate a strategy to improve their credit scores, and show them how to work towards becoming debt free by designing a debt reduction plan unique to each person’s situation.