Bad credit happens, but it doesn’t have to stop you from getting financing for a vehicle. If you’re credit score is in a bit of a valley, it pays to remember that there are other factors lenders consider when deciding whether to approve your loan.
- Available Collateral
If you need an auto loan and you have a low credit score, then the value of the vehicle you’re purchasing becomes all the more important. This is because the market value of the car is what a lender would hold as collateral should you be unable to pay back your loan. The higher the value of the vehicle, the more attractive a risk you may look to a potential lender, even with poor credit ratings.
- A Cosigner
If you’re shopping for bad credit car loans, maybe finding a cosigner would be wise. This is somebody with good credit who will become responsible to pay off the loan should you find yourself unable to do so. This helps provide the lender with some security in their investment and reassurance that they will be paid back. A cosigner is usually a close friend or family member.
- Expenses Versus Income
If your expenses (other loan payments, mortgage payments) are moderate and your income is higher, than a lender is more apt to view you as a low-risk borrower. This could mean picking up that second job for evenings and weekends, or it could indicate that you should get whatever school loans and mortgages paid off that you can.
- Down Payment
If you can save up the cash, making a solid down payment may help demonstrate for a lender that you are serious about making good financial decisions. Another benefit to a down payment like this is that it reduces the principal loan amount, so there’s less money on the line and the lender has less cause for concern.
Despite your bad credit, these aspects of your finances are taken into consideration by lending institutions when you’re applying for a car loan. The above suggestions should be helpful in scoring the funds you need.