The first people denied credit during a shaky economy are those with lower credit scores. Bad credit car loans are usually the first portion of a bank’s portfolio to be axed. What most people are asking now, is can they get a bad credit loan as the economy recovers.
According to Melinda Zabritski, director of automotive credit for Experian, people facing credit challenges will probably have better luck obtaining financing in the used car market. The interest rates that you will have to pay are going to be higher than average, but the credit scores that are procuring loans for used cars are substantially lower than those for new cars. Actually, by about 110 points.
Here are four tips to brush up on before looking for a car:
- Set a budget for yourself. Never spend more than 18% of your monthly income on a car payment.
- Check your own credit. Plenty of websites offer free one time credit reports. Use one so that you are aware of any credit issues before shopping.
- Stop by your local bank or fill out an online application to get pre-approved for a loan before shopping. That will give you an idea of the maximum you will be able to spend and stop you from being distracted by obtaining a loan while your are negotiating a price.
- Be prepared to pay a high down payment. Second chance auto loans usually demand it and it will lower your monthly payments. Try to put 20% down on your next car.
You can get a bad credit car loan if you have the right down payment and shop around. Prepare yourself with a little research and stick to your budget. Follow these tips and you will be able to repair your lagging credit score.