Don’t believe anyone who says you can’t get an auto loan with a low credit score. You might not qualify for the best interest rate or receive the best terms, but an auto loan is one of the easiest loans you can get with no credit or bad credit. The trick, however, is knowing where to apply, and understanding exactly what lenders need from you.
Shop Around and Compare Auto Loans
If you have a weak or damaged credit score, most banks will consider you a risky borrower. Even if you have every intention of paying on time, you’re more likely to default on the loan than someone with excellent credit. Therefore, there’s no way around a subprime interest rate.
Although you can’t escape higher rates, you can shop around and speak with different auto lenders to find the lowest rate possible given your credit condition. For example, two or three banks might quote an interest rate of 7% or 8%, but if you dig deeper, you might find a bank that’ll offer you a 6% auto loan rate. The lower your interest rate, the less you’ll pay every month.
Bring Cash to the Table
If you have a low score, the more cash you bring to the table, the better. The bank financing your auto loan might not require a down payment. However, if you’re willing to put some of your own money into the deal, you gain a little negotiating power, and you might be able to persuade the bank to reduce your auto loan rate.
Get a Cosigner for Your Auto Loan
Fresh start auto loans let you get a new set of wheels even when you don’t have the best credit score. But if you don’t like the idea of paying a high interest rate, you might snag a better rate by adding a cosigner to your loan.
Finding a cosigner for an auto loan is much easier said than done. Most people know the potential risks of cosigning, and understandably they might be uncomfortable putting their credit and name on the line.
Cosigners aren’t just silent partners — they’re co-applicants on the auto loan, so they’re just as responsible for the debt. As the primary applicant, you’re the main person repaying the bank. But if you become MIA and default, your cosigner assumes responsibility for the auto loan.
Prove Affordability
Money talks, and sometimes, proving you can afford an auto loan is all it takes to buy a car. Because auto loans are collateral-based loans, many lenders will work with low-score applicants, providing they have verifiable income and steady employment. As a bonus, getting an auto loan with bad credit can even help your credit score. Every month that you make an on-time payment, your auto lender updates your credit report with positive activity. This increases your personal credit score, helping you qualify for a more favorable rate the next time you apply for an auto loan.