A poor credit score should not hinder anyone from buying a car. It is definitely not a reason to sign a car loan with very high interest rates. There are limited options that provide car finance for poor credit but that does not mean there arent any good deals. Shop around and there are a few good ones. Theres no reason to settle for budget-breaking financing terms.
Applicants with poor credit (called subprime borrowers) should expect higher rates than those who have good credit. Researching will give an idea of the prevailing average interest rates. Generally, interest rates for those with good credit range from 4% to 5%.
For those with bad credit, interest rates range from 10% to 13%. So if the loan term comes with 20% or more, do not be tempted or become desperate. That is not the only option available. There are plenty of financing institutions that give something lower.
When searching for financing deals, use these strategies to take advantage of fair loan terms:
#1: Check your credit score yourself
When applying for car financing, the lender will definitely check the credit history of the borrower. Most people rely on that report. Never allow this situation to happen. A well-informed applicant has better chances of scoring a better deal, even those who have poor credit standing.
#2: Be more optimistic
According to finance experts, borrowers are seen differently from each other. People with the same credit score will not be viewed in the same exact manner, so be more optimistic. A bad score isnt always a hopeless case. At times, someone with a low credit score leaves with a better deal than someone with a better score.
#3: Check for options
Just because your credit score is bad does not mean you immediately agree to all the terms of the first finance company that offers an auto loan. Look at a few financing companies and see which one offers better terms. Financing companies do not have the same exact opinion of a borrower. One company may see an applicant in a better perspective than another.
In looking for auto loans, be wary of some red flags. Avoid getting lured into scams or unfair deals. It is better to avoid lenders who advertise their services specifically for subprime borrowers. These companies can be tempting to strike a deal with, thinking that these are the only ones who take risks. There are reputable credit companies that do take risks and approve auto loans for subprime clients.
#4: Try applying close to home
Before looking far for an auto loan, try asking at the bank where an account is already set up or at the credit union enrolled in. Try these first even if there may seem to be little chance of getting an approval.
#5: Check lenders specializing in car finance
It is better to seek out car finance lenders rather than lenders who cater specifically for subprime borrowers. These are more likely to be more accommodating to subprime borrowers than companies that offer a wide range of different types of loans. There is a higher chance of getting approval for car finance for poor credit with these lenders.