How to Get a Car Loan when you have Bad Credit

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Having bad credit isn’t the end of the world. Sure, it can make things more difficult, but there’s plenty of opportunities to still get the services you need despite your credit score. Together, we’ll go over a few options you have to nail down a car loan even if your credit is a bit less than desirable.

What is a Car Loan?

It may seem basic, but hey, everyone’s got to start somewhere. A car loan is a simple agreement between two parties – one party lends the second party money to purchase a car, and the second agrees to pay them back over time. Depending on the terms of the agreement, the borrowing party may owe interest (often known as annual percentage rate or APR) on the loan over time, but there are some deals where that’s not necessarily the case.

Interest, Car Loans, and You

Unless you happen to nab a 0% APR deal, chances are your car loan will have some sort of interest. This is extra money given to the lender for giving out their funds. Depending on a number of different factors, your interest could be just a small addition, or a sizable sum when it all comes down to it. There’s a lot of math involved, but thankfully calculators have been made online to help sort out the many different moving pieces of a car loan. Those pieces include…

  • The term of the loan, how long you’ll pay it back over. Longer terms give the borrower more time to flake out, so they often have higher interest rates.
  • The type of vehicle being purchased. Some vehicles come with an inherently higher risk, and therefore, a higher interest rate.
  • Your credit score. Yep, the shoe had to drop somewhere. Your credit score being lower usually means a higher interest rate. If that’s something you’re willing to accept, then you’re good. But there’s ways to mitigate that and make it easier on your mind, and your wallet. Let’s take a look.

Car Loans: Down Payments and Deferrals

When going in on a loan, people do not generally have the money to just pay in full. That’s most likely why you’re getting a loan, after all. But if you have bad credit, it might be a good idea to pay more up front to defer some of that interest.

The more you have left over after your down payment, the higher your interest rate will generally be. Add that to the increase from a bad credit score, and you’re looking at a hefty chunk of change. Ponying up a bit more at the front end of the loan may be able to save you a lot on that slow financial drain, and keep your loans a bit more manageable.

Hold Off on Something Pricey

We all have a dream car we’d love to own. Whether it be an old classic or the newest model fresh out of the factory, there’s always one type that catches your eye. But, if you’re in the hole on credit, those favorites will probably need to wait until your score has recovered. It might be hard to hold off on your baby, but if you don’t want to have to hack off an arm and a leg to cover it, you’re better off starting with something with a bit less style and a bit more stability.

Don’t Lose your Cool over Rejection

When you have bad credit, chances are you’ll be shopping out to numerous different companies looking for a loan, and chances are a fair share of them will turn you down. If this happens, keep calm and move on. Most companies will give you a breakdown as to why they can’t give you a loan, which can be a helpful tool to refer to for those in need. Maybe you were in the market for something too pricey, or maybe they have tips to get you back on your feet. Either way, their advice can only help.

When shopping around for loans, beware of some prospective lenders that promise to approve anyone and everyone. Chances are, they’re trying to lure you into a trap that’ll result in you being in over your head, and nobody wants that. Being indebted with little way out like that can be rough, and many won’t give a rat’s toss about what dire straits they end up putting you in, so make sure to do your research on the lender before you commit. Being rejected a few times is better than a life indebted to a loan shark.

A Car Loan Co-Sign

If you have a friend or family member with better credit, it’s possible to co-sign on a loan with them. Having a friend on your side for the loan can help balance our your below-average score and give you a bit more of a fighting chance for acceptance. It helps with everything from acceptance, to payment term, and even vehicle options. There’s a catch, however.

If you do go for this option, make sure you’re extra careful to stay on top of your payments. If you slip up, it’s your friend who’ll end up taking the fall for it and paying your debt, and it’s happened often enough that people are rather wary of doing co-sign deals. Not only may you suffer financially if you drop the ball, but your friendship could take a hit as well. If you’re confident that you’ll be able to keep up, this may be the option for you.

Getting a car loan is doable no matter what your financial situation. You’ll need to take some extra steps, and make some concessions and compromises, but it’s still a very achievable goal. If you’re still struggling after this article, maybe try meeting in person with a lender or representative. If you explain your financial information in person and have a heart-to-heart, they still may not be able to approve you, but they may be able to help you make a financial plan going forward. Bad credit isn’t the end of the world, and with all this in mind, I’m sure you’ll be able to find a plan that works for you.

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All loans will be serviced by LoanMart. See State Disclosures for additional information.

1Loan approval is subject to meeting the lender's credit criteria, which may include providing acceptable property as collateral. Actual loan amount, term, and Annual Percentage Rate of the loan that a consumer qualifies for may vary by consumer. Loan proceeds are intended primarily for personal, family and household purposes. Minimum loan amounts vary by state. Consumers need to demonstrate ability to repay the loan.

2Based on consumers who received a loan from LoanMart from February 2002 to October 2018.

3Application processes could take five (5) minutes to complete. Upon completion, a conditional approval may be given pending review of documentation. Funding time is based on the time from final approval following receipt and review of all required documents and signing, prior to 2PM PST on a business day.

4To exercise the right to rescind, the consumer(s) must notify the lender in writing by midnight on the third calendar day from obtaining the loan. Within one business day from notice of rescission, the consumer(s) must return any monies received and fees paid on behalf of the consumer(s) by certified funds.

5Lenders recommend and encourage consumers to pay early and often and more in order to avoid additional finance charges.

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