Ultimate Guide on How to Get the Best Car Loan with Bad Credit

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You can get the best car loan with bad credit. Most car buyers know the make, model and color of the vehicle they want but generally lack the knowledge on how to a bad credit car loan.

If you want to save money and time, become informed to get the best car loan with bad credit. Car buyers with bad credit have options and the best way to exercise those options is to get approved prior to walking into a car dealership.

The car buying process is smoother when customers come in with financing in place.

Plus, when you have your financing in place you become like a cash buyer who gets to call the shots. Here are few tips to secure the best deal for the car of your dreams.

How to get a car loan with bad credit

1. Pull your credit reports and scores

Before you look for financing. You want to know exactly what you are dealing with before any lender pulls your credit reports. Any mistakes, errors or outdated information should be disputed. You want your credit report and credit score to reflect as much positive information as possible.

2. Window shop in person

It’s best to go out and take a test drive to get the feel of the car you want. But don’t allow the sales person to talk your ear off during or after your test drive. Resist the small talk and don’t feel pressured to buy the car on your first visit to the dealership.

More importantly, NEVER take a car home prior to final financing. Many unsuspecting car buyers have been caught in this scenario and ended up with a much higher interest rate than expected.

Customers get excited about the purchase but don’t realize the deal isn’t finalized. You take the car home thinking you have an agreement but the dealer calls you the next day and says there’s a problem with financing. You are then informed that financing is possible, but at a much higher interest rate. Dealers don’t always emphasize the car is being delivered subject to final approval.

3. Ask your credit union to finance you

When purchasing a vehicle start looking for financing at your credit union. Credit unions can often offer the best interest rates, especially if you are a long term customer. Credit unions like to form total relationships with customers. That means checking, savings, mortgage, car loan, credit card, and possibly even retirement accounts.

Your credit union may be able to work with you if you need a bad credit car loan, especially if you have direct deposit. You may be able to have the car payment come directly out of your checking account which may sway the approval process in your favor.

7 Online lenders for a bad credit car loan

In case you don’t have a credit union relationship check out online bad credit car lenders like:

  • 1800FreshStart They help all credit types get financed. Car loans range from $5,000 to $40,000. Car buyers with bankruptcies, repos, foreclosures, late payments, charge-offs and collections can get approved.
  • InstantCarLoan is another online lender that caters to consumers with bad credit. They review completed applications instantly and you can have an answer in as little as 60 seconds.
  • MyAutoloan will get your multiple loan offers after filling out only one loan application. The minimum loan amount is $7,500.
  • Auto Credit Express® allows bad credit borrowers to apply for new and used cars ranging from $3,000 to $45,000 with affordable down payments.
  • CarFinance.com can get you preapproved within 30 minutes during business hours. Car buyers with bad credit may have trouble getting their lowest interest rate. The minimum car loan starts at $7,500.
  • Springboard Auto prequalifies car buyers with no impact to credit scores. That’s great because if you don’t qualify you will not have to worry about taking a hit to your credit score with a hard inquiry. Car loans range from $7,500 to $40,000.
  • Capital One Auto Finance offers bad credit loans up to $40,000.  They can pre-qualify you in minutes and let you see real monthly payments and APRs based on your unique information with no impact to your credit score.

Never pay the dealer’s price

If you don’t like negotiating, take someone with you who does. Edmunds, a popular car buying information site, says you can save up to $2,000 off the asking price if you are willing to negotiate. It doesn’t have to take all day. Never allow a sales person to keep you isolated in a little cubicle filling you up with beverages while they go and consult with the “Wizard”’ (finance manager).

Remember, you have your financing in place because you’ve been pre-approved by a lender already. There’s no doubt the dealer will try to run your credit to see if they can finance, but just say no thank you.

Know your bottom line and keep in mind a car dealer’s initial offer can be marked up as much as 20 percent above the sticker price. Knowing this can give you a lot of wiggle room to negotiate a fair asking price.

Never negotiate the monthly payment

Car dealers like to focus negotiations around the monthly payment of a car. Don’t even answer the question if a salesperson asks you “how much can you afford to pay monthly”. Refocus the attention towards the cost of the car and the interest rate, if you choose dealer financing.

Utilize the online loan calculators to determine what you want to pay according to the interest rate. Remember, the interest rate and cost of the car determines the monthly payment. But since you’ve secured financing before you visit a dealership you can avoid all talk of financing and just negotiate a fair price for the vehicle.

Shop lenders in a 2-week timeframe

Most credit scoring systems have been designed to count multiple car loan inquiries as one if done within a 2-week timeframe. Therefore, as long as the inquiries were all made within a certain period of time, usually 14 days, they are counted as just one when calculating your score.

The practice of counting multiple auto loan inquiries as just one enables you to shop for the best rates and terms without hurting your credit scores. While each inquiry will still appear individually on your credit reports, your credit scores won’t take a hit for multiple hard inquiries. Credit inquiries remain on the credit reports for two years.

Finally, review all documents and paperwork

Review final paperwork before signing any contract. Be certain that all negotiations agreed upon are in the final contract. Check the price of the car, interest rate and loan term. Check the fees and costs and don’t feel pressured into purchasing extra features, such as gap insurance and extended warranties.

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