Auto Loan With Bad Credit: 3 Tips To Learn The Back Roads Of Auto Financing

By Robbie T. James

Auto Loan with Bad Credit: 3 Tips to Learn the Back Roads of Auto

Very few car-buying consumers can afford to pay cash for a new or used car. Much more common is to apply for auto financing. The truth is, without financing, most of us would be driving around in 15-year old clunkers which are probably missing a couple of hub caps and a gas cap.

The reality is that if you want a decent car for yourself today, you are going to need to qualify for an auto loan. However, this is a particular challenge if your credit score is less-than-perfect. Having a bad credit score (below 600) is a legitimate reason for concern for getting qualified with 99% of the lenders out there. The trick is to learn the back roads of the auto financing world in order to secure financing if you have a bad credit score.

If you are on the lookout for an auto loan with bad credit, here are 3 financing tips for landing yourself the best rate:


1. Don’t try to time the interest rates too closely in terms of market trends:

One mistake that people tend to make in this situation is to try to time the market in terms of interest rate trends. For example, these folks will look at recent 3-month or even weekly trends and try to call lenders on days when the rates are at their lowest.

While the logic of this strategy is sound, in practice it does not serve you very well. The fact is, you need a car today – so waiting until rates go down a tick or two could actually cost you money in terms of the “opportunity cost” of NOT having a car in the meantime. But more importantly, you stand to get the best interest rates on an auto loan when you shop around and apply to multiple auto lenders. It is this, rather than trying to time the market, that will work in your favor.

2. Put yourself in the best-possible light in the eyes of would-be lenders:

Next, you need to put yourself in the best light. In addition to your credit score, bad credit auto lenders look at other factors such as your employment history, how long you have owned or rented a home, and your credit history with regard to paying auto loans in particular. They also look at the size of the loan you are wanting to take out.

Be sure to get your ducks in a row by running your credit reports (all 3) to find out whether you have any errors that need correcting – and be sure to notify the bureaus if you do. In addition, prepare any documentation that the lender may ask for regarding your employment and residential histories; anything that can help establish creditworthiness.

3. Widen the playing field by applying to many lenders at the same time:

Auto lenders are not all the same, and no two lenders will view your application for a loan in the same way. It is a huge mistake to assume that getting a rejection or receiving a too-high interest rate offer from one lender will mean the same for the rest you might apply to. So, make a list of at least 5-7 “bad credit lenders” and take the time to apply to each and every one. You never know – it could be that the last lender you apply to is the one who offers you the very best rate – which could save you thousands.

Consider these 3 tips as your look for auto loan financing, even with bad credit.

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