Although challenging, getting an auto loan with bad credit is not impossible. There are multiple factors that an auto finance lender considers, not just a credit score. Not to mention, there are several buyers with poor credit who get an auto loan with ease. So even though your situation might not look rosy, with good planning and a little bit of research, you will be able to snag that loan with no problem. Herein, we help you get what you need without much hassle.

1. Try to improve your credit score

It’s not too late to work on your credit score. If your need for a vehicle is not immediate, then you can take the following steps to improve the chances of your loan getting approved by an auto finance lender.

2. Pay your bills

Outstanding bills and dues affect your credit score negatively. Completing any late or missing payments improves your payment history and instantly adds to your credit score.

3. Reduce debt

As much as possible, try to get rid of any debt that you may have. Not only will you be more financially stable while applying for the loan, but your credit utilization ratio also increases. It is necessary that the credit utilization ratio is below 30 percent for a good credit score.

4. Check for inaccuracies

Sometimes, there might be errors in your credit report that weigh down your credit score. Finding and eliminating these inaccuracies boost your credit report.

5. Research is key

Firstly, research your auto finance lender. There are a few lenders that specifically offer finance to individuals with low credit scores. But these lenders might charge a higher rate of interest. It is important that you study your budget, financial history, and needs for a vehicle before you choose to apply for these loans.

It also helps to be aware of some financial aspects such as the APR of the loan you’re applying for and the Kelly Blue Book value of the car you’re interested in. This research not only makes you aware of your own needs and limitations but also makes you go into loan negotiations well prepared.

6. Getting a co-signer

A co-signer takes on the responsibility of paying off your loan, should you default on payments. Therefore, co-signing is a serious burden for someone to shoulder. While a co-signer gives your auto finance lender a guarantee, it can be quite the risk to the other person if you’re not able to pay off your loan.

A safer alternative would be to bring a trustworthy relative or friend along with you to negotiate with your auto finance lender. Getting a stable, well-respected individual to argue on your behalf increases the lender’s impression of you, increasing your chances of getting a loan.

7. Loan terms

While you might have a lower credit score, it is no way smart or necessary to accept bad loan terms from an auto finance lender. Look for lower annual percentage rates (APRs) over shorter time periods instead of smaller monthly payments. Higher APRs may lead to you paying more than the actual value of the car. If you can’t find reasonable interest rates, try for another vehicle instead.