When financing a new or used car, your credit score can decide how favorable the loan terms are. But one of the most common misconceptions about car loans is that you need an impeccable credit score to get a fair loan.
We’ll show you how to get an affordable car loan with bad credit by establishing your reliability, saving for a larger down payment, and more.
Save for a Larger Down Payment
If your credit is on the lower side, you can offset the higher interest rates that lenders want to offer by increasing your down payment. Saving could mean waiting longer for the car you want, but it’ll pay off in the long run with more agreeable interest rates.
Typically, industry experts recommend putting down about 20 percent of the car’s worth. There are a lot of other factors, but if your credit is below average, you may want to consider raising that number to offset worries from the lender.
Lenders look at your credit score as a marker of your reliability, so if your score is poor, you’ll have to show your stability in other ways. Lenders value consistency in employment and residency, so that’s a good start if you’ve had the same job and lived in the same place for years.
Bring some pay stubs of your employment dating back years to show that you have a reliable source of income. Proof of residency is also helpful in demonstrating that you can make payments.
Bring a Co-Signer
One way to offset a poor credit score is by introducing another party to the loan as a co-signer. Having co-signers can reassure many lenders of your ability to repay the loan, especially if the co-signer has a better credit score.
Ask a friend you can depend on a relative if they would come down to the dealership with you and sign on as a co-signer. It’ll also give you better leverage when getting to a lower interest rate.
Remember that you have more options as you’re coming to terms with car financing at the dealership. Don’t be afraid to assert your right to walk out on the deal and find another lender from a credit union, bank, or another lender.
You have many options for financing, so keep that in mind if you don’t think you’re getting a fair offer from the dealership.
Those were some ways how you can get an affordable car loan with bad credit. Keep in mind that your credit score doesn’t encapsulate everything about you, and there are numerous other ways to show your reliability to lenders.