If you don’t know your credit score and are afraid to look, odds are this article is for you. If you’re worried your credit is too poor to get a decent car loan, stop worrying. Follow these tips to help you secure a loan that will work for you know as well as in a year.
While we can’t promise following these tips will put you behind the wheel of a new BMW, we can tell you that following this advice will help you get the best loan available to you right now — and may help you get the vehicle you need.
Tips to Help Get A Car Loan Despite Your Credit Situation
- Know Your Numbers
The first step is to figure out what your credit situation is. If you haven’t already checked your score, there are plenty of free services out there. Some will try to get you to pay a subscription after a free trial period. Ignore those options and instead try a truly free option, such as CreditKarma.com. This site will provide free access to your credit score from both Experian and TransUnion and will also help you identify ways to improve your credit score.
Once this is taken care of, you can start the process of shopping around for the best loan option given your situation.
- Star Shopping
Time to shop for your loan. Review the offers from banks and other lenders. As with anything else worth buying, it’s worth taking the time to look around to find what deals are out there. Depending on your credit score, you may find a lender willing to loan to you in the 4% – 5% range if your credit is good. Other lenders who focus on the “subprime” market will probably have rates nearly double those of traditional lenders. By comparing offers, you’re a more educated consumer and that will help you once you’re ready to commit to paper.
- Verify Everything
At some point, you may have been told that you had poor credit and taken the bad news at face value. And that may have been enough to keep you from actually reviewing your own credit. If that’s the case, now’s the time to pony up. Check your credit. Do it now. A bad credit situation you know is something you can control and correct. Avoiding bad credit won’t help it go away. So check it and know what you’re dealing with.
- Be Optimistic
A lot of people with poor or low credit believe they have to settle for a high-rate loan because they can’t qualify for a prime rate. Maybe they had to take a sub-prime mortgage previously so they assume they will always have to pay a higher rate. That’s not always the case because a car loan will require far less money to be lent as well as a shorter loan period. This is a lower risk for the lender and will often mean they are willing to give you a better deal than you had anticipated. Don’t sell yourself short.
- Stay In Your Local Community
Whether you think you will qualify or not, check with your own bank or credit union first. And check with your employer as well as your insurance company. Sometimes they offer financing options you can take advantage of. And working with lenders you have an existing relationship with can often help you get more favorable terms than if you go to a stranger you have no history with.
- Look For Good Lenders
While you may not have a perfect credit situation, you still shouldn’t focus on just looking at lenders who focus on sub-prime loans and clients with low credit scores.Research lenders that deal primarily with car loans. Big national banks and online lenders deal with car loans frequently and can often give good rates — especially compared to local hard money lenders.
- Don’t Go Alone
Bring someone with you when you go to speak with the lender. The “witness” will help keep your lender honest and will allow you both to engage the lender and make them work to give you a better deal to win your business.
- Play the Long Game
Pay attention to the total amount you will pay over the life of the loan. Many lenders will meet your monthly budget by setting a longer term on the loan. That lower monthly may sound good up front but you will be paying significantly more interest over time. Pay attention and be smart. If you can’t get to your budget number with a standard length term, you may be looking to buy more car than you can afford. And that is never a good situation to be in.
- Be Careful Of Extras
When you’re reviewing the deal, carefully check the agreement and the services and fees that are included. Things like extended warranties, after-market services and insurance are all add-ons used to increase the loan rate without bringing any real value to the deal for you, the buyer. AVOID THEM. If the lender won’t remove these add-ons, then remove yourself from the deal.
- Set The Terms
Before you sign anything, make sure the terms you wanted are in the agreement. You may be excited to get in your new vehicle, but remember, you are signing a legally binding agreement. If you accept conditional terms, your dealer may increase your rates at any time. Make sure your monthly payment can’t be raised or you may fall victim to a “yo yo” scam some unscrupulous lenders are known to use.