Is your car on its last legs? Are you in need of a new one — or at least a new-used one — but your credit is less than perfect? Don’t despair. There are ways you can get an auto loan even with bad credit. Here are some basic steps to follow:
1. Check your credit score. While you’re already aware your credit score is low, you’ll need to know the exact number from the three major credit bureaus: Experian, TransUnion and Equifax. The lower your credit score, the higher your interest rate will likely be. If your credit score is lower than 520, it’s probably not a good idea to try and get an auto loan at this time. Interest rates for credit scores 520 or lower can be 29% or higher.
2. Check for inaccuracies. Sometimes there can be errors on your credit report that lower your credit score needlessly. If there are mistakes, have them corrected by the creditor.
3. Get pre-qualified. Go to your bank — and one or two more — to see what sorts of loan amounts and interest rates you qualify for. You can still apply for credit at the dealership as well, but this way you’ll have options and can choose the best terms.
4. Buy at the end of the month. Car lots often have quotas they are trying to reach, so you might get a better deal if you shop toward the end of the month.
5. First time buyer program. If you’re eligible, this can help you get a better loan rate.
6. Find a co-signer. A co-signer with a 700 or higher credit score will lower your interest rate considerably. But remember that if you default on the loan, the co-signer will have to pay it, so be sure you’re really ready to take this step.
These six tips should get you well on your way to better set of wheels. One last tip: Do your homework, and buy a car that is reliable and fuel-efficient!