If you’ve had credit issues in the past and need a new vehicle, you may start to worry that you’ll be turned down for financing. You might have even heard about the high interest rates and high payments with bad credit lenders. While it’s true that you may need to pay more for a vehicle if you have a lower credit rating, you do have options to get a decent car loan for bad credit. Here are simple tips for landing the best car loans in 2022.
Know your credit rating
First of all, don’t assume you know just how bad your credit rating is. A couple of missed payments in the past may not have hurt your credit score as much as you might think. Don’t guess; instead, check your score on your own.
You may need to pay for your credit history, but you can get an idea from several free financial tools online. Credit Karma is one such product that tracks your credit history and helps you find ways to improve it. While it’s one of the most popular, you will find other tools when you do a search.
Talk to the dealer
Once you know your credit score, you can take the next step. You can talk to the finance department at the dealership about a car loan. You don’t need to settle for a beat-up ride from a lot that says, “No credit checks” or “We take call kinds of credit”. Many of those places charge high interest rates, making your payments unaffordable.
Most dealerships have multiple loan products for the various credit levels. For those with a lower credit rating, they may pay higher interest rates, but it’s usually less than 15 percent. Compare that to bad credit lenders that charge 20-30 percent or higher. Start with the dealership before you go anywhere else for a loan if you have less than perfect credit.
Work on your credit rating for the best car loans
If your credit rating is really low, below 550 in many cases, you may have a hard time getting a car loan from anywhere. In this case, you need to either save money to pay cash for a cheap used car or wait and work on your credit history.
It doesn’t take as long as you might think to make an improvement in your credit rating. Pay down credit card balances, get caught up on any late payments, and pay off old accounts. How quickly you can do this will depend on how much debt you have and how much money you can put towards it.
Search for a bad credit lender
If you really need a newer vehicle to get to work, you may find some online lenders that will work with you. Even with the high interest rate, the payments can be affordable if you choose to buy a cheaper vehicle. You can still find several models for less than $20,000 new or under $10,000 pre-owned.
Select the least expensive model you can get to ensure you can afford the loan. Pay any extra you can to cut down on the amount owed and the interest you pay. Once you make several payments on time, your credit may improve enough to qualify for a lower interest rate loan.
Having a poor credit history doesn’t mean you can’t get a quality vehicle or that you can’t afford the payments. Don’t jump in, but do your homework and research your options to find a car loan that you can afford as you rebuild your credit.