Bad credit auto loans exist if you know where to look. The critical step is to understand that you will pay more for an auto loan if you have less than perfect credit.
One of the biggest mindset changes is that you have to find the loan first, then find the car after you have secured your auto loan. You can follow one of three approaches: look for dealer financing, work with your local bank or look for a loan through one of many websites specializing in auto loans for bad credit.
Before you go to either source, find out your FICO score by pulling your credit report. Knowing that number before you deal with the lender will help ensure you are not taken for a ride.
If you are going to the dealer with that knowledge in hand, start with new cars that have a high rebate associated with them. Also consider “second tier” brands that have lower entry price points on new cars. It is a lot easier to get a loan for $15,000 with a credit score of 550 than it is to qualify for a $30,000 loan. Many loyal Hyundai buyers got their first Hyundai because they were turned down for Toyota or Honda vehicles and needed a lower price point.
Once you find a car that you feel will meet your needs, allow the dealer to run your credit. They should get a similar FICO to the one you ran for yourself. If they imply it is more than 5 points different, walk away.
The other way to find a decent auto loan is to start with the bank. If you use a local financial institution and have direct deposit from your job, some local financial institutions have special agreements with local dealers to provide some shaky credit lending to existing customers.
Finally, the internet can offer a number of lending alternatives for your vehicle purchase. Take some time to research sites with a third party to avoid identity theft or predatory lending. Poor credit or a 550 credit score does not have to stop you from buying your next car.
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