Obtaining a Car Loan with Bad Credit

Don’t Let Bad Credit Prevent You From Buying a New Car

 Fact. Transportation is important. The problem is that if you have poor credit at the time your car decides to kick the bucket, you may have a very difficult time obtaining approval for a new loan. Here are some things you’ll need to keep in mind as you work towards obtaining a bad credit loan you can use towards your new vehicle purchase.

 

Know Your Limits

There is nothing worse than walking into a car dealership and walking out feeling partially happy because you have a new car and partially terrified because you were talked into taking a loan payment you really can’t handle. Know your limits before you talk to a dealer or lender of any kind. You know your budget better than anyone else, and you know what you can afford. Don’t let anyone pressure you into thinking you can handle something you know in your heart (and head) you can’t.

 

Be Prepared to Prove You Can Pay

Despite your previous credit history, lenders offering bad credit loans really care about whether or not you can pay now. You’ll need to take proof of your identity as well as proof of your employment or income when you go to the dealership or lending institution. If you have a formal job, you’ll need to take your pay-stubs. If you are self-employed, you may need to take a copy of your most recent tax return. If you are unsure, call the dealership or bank in advance so that you can take extra documents if they are needed. The more you have with you, the faster the process will go.

 

Check Your Credit Report

Even though you already know your credit report is a bit messy, you should still be familiar with exactly what is there. Make sure you request a copy of your credit report showing the scores from each of the three major reporting bureaus. Double check every single item listed on your report. Make sure that closed accounts show as closed and make sure there is nothing on the report that does not belong to you. I once had a credit account showing on my report that actually belonged to my mother! Taking the time to have corrections made will help to boost your credit score and make obtaining a loan a little easier as well.

 

Find Your Own Lender

If you have bad credit, your best bet is to look for your own lender before you go to the dealership. The dealership lenders tend to charge higher interest rates because part of that rate kicks back to the dealer. Move quickly to the next lender if the first one denies your loan. Multiple inquiries into your credit score for the same purpose (like a car loan), if made within a one-month time period, count as one inquiry and will cause less damage to your overall score.

Your past should not dictate your future. Take your time and find a way to obtain a loan that is reasonable for you – then stick to your budget. You’ll be back on the road before you know it.

 

 

About the Author: Patty Kleen is a full-time writer with a  passion for personal finance. She enjoys helping those with poor credit histories make changes so that they can have a brighter financial future.
 

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