Tips to Improve Your Chances of Getting Approved for Bad Credit Car Loans
You can’t get any car financed with bad credit if you don’t have a co-signer. If your credit is good but you are still having trouble getting approved for a car loan, there are things you can do to boost your chances of getting financing on the vehicle of your dreams. A dealer may be able to offer some of these suggestions, but shopping around among various dealerships will show that each dealership has its own way of doing business.
Here are things that will help get your loan approved faster:
1) Have all documentation ready before you shop or even step in front of the salesperson.
Fax in all paperwork beforehand so when it comes time for them to crunch numbers they’d delayed by having to wait for your paperwork to arrive.
2) Make sure you have a down payment ready- Cash is king –
Your lender wants to see that you have the means fund at least 10% of the vehicle’s purchase price. If you are buying a new car, bring along photos of your other assets which show that you have money saved up so they know where it came from.
3) Never pay more than MSRP for the car-
Everybody knows that dealer hold backs are very real and should be expected. There are some dealerships that will negotiate with customers if they find out during their credit report check that the customer can afford to meet or exceed MSRP for their purchase.
4) Don’t settle on features or color that aren’t important to you-
If you can afford to buy your new car, then you should be able to afford to get the color and equipment that is important. Dealerships will work with customers who they know can pay for their desired vehicle if it means making more money on the sale.
5) Get preapproved for a loan from a bank or credit union before going to dealership-
This saves time and allows them to move forward with financing options right away rather than waiting for a lender approval which will often times require a higher interest rate.
6) Have a list of all debts in order of highest monthly payment-
The goal here is that the total debt is not greater than half your gross income. For example, if your take home is $2,000 a month after taxes, you can afford a debt no greater than $1,000 and the interest rate would be lower. If all your credit cards are maxed out and your monthly payment is $2,500 for credit card payments alone- it’s going to be hard to get approved.
7) If there isn’t any money in savings then open an account-
You need to start building up this equity as soon as possible. I know that buying a new car isn’t exactly how I’d like to see someone do it. But if you don’t have urgent cash needs then it’s ok. Once the loan is paid off you’ll begin to build up equity and eventually will pay yourself back using cash-out refinances or sell it and buy a cheaper car.
8) Have the vehicle you want to purchase serviced before buying-
This is more common sense than anything else but if you are serious about the car. Then has the maintenance performed at a reputable garage that will provide you with proof of service. Since many people don’t pay their bills on time. They may try to cancel your loan due to lack of maintenance. Which shows they aren’t responsible enough to keep up with scheduled service.
9) Do not finance or refinance for longer than 84 months-
The most important thing here is that you ALWAYS pay more than the monthly amount require. So that your loan can be paid off in full early.
10) You have poor credit, shop for a pre-owned car.
Dealerships will work with you on purchasing a used vehicle if they know that this is your only option. The interest rate may be higher. But it’ll likely be easier to qualify for financing given the lower value of the used asset.
Conclusion:
If you can afford to put 10% down on a new vehicle. And have no debts greater than half your gross income. Then buying a new car is definitely an option for you. Obviously we wouldn’t recommend that anyone with poor credit purchases a brand new car. Since the interest rate requirements would be much higher and in some cases may not even be approved. For everyone else: If they do not mind having a used car- I’d suggest purchasing one in good condition. From either auctions or dealerships who specialize in this type of business.