Get a Low Interest Rate Auto Loan with Bad Credit

It is possible to get a relatively low interest auto loan with bad credit. There are several steps you should take to make sure you get the most favorable financing available for your credit situation.

Improve your credit rating. If you are reading this article, chances are you looking for a quick fix for your auto loan needs. You might be surprised to find out that there are steps you can take to improve your credit rating fairly quickly. If you are not already doing so, start paying your bills on time. If you are having trouble making payments, see my article “How to Negotiate with Credit Card Companies to Lower Your Monthly Payments.” Try to pay down your balances to less than 50% of the credit limit, and delete recent multiple entries on your credit report. See “How to Delete Inquiries on a Credit Report.” Hyperlinks to both of these article appear in the “Resources” section at this end of this article.

Shop around for a lender. One of the simplest ways to shop for an auto loan is by submitting a quote form online. You can compare multiple offers and choose a low interest auto loan that meets your needs. While you may not receive an offer as low as a good credit customer, you may find that some lenders treat bad credit customers better than others. If you have a long-standing account with your bank, you might also see if the bank would be willing to waive its requirements. The bank may do this if you can convince the bank that you are likely to repay the loan.

Save up for a sizeable down payment. A good rule is to make a down payment equal to ten percent of the purchase price of the vehicle. Lenders are more likely to give you favorable terms with a sizeable down payment, because they realize that you are less likely to default on the loan if you may face repossession of a car in which you have made a substantial investment.

Be wary of high pressure sales tactics. Do not give in to hard sell tactics by auto dealerships. Be sure you know how much car you need and can afford. Remember that the salesman’s job is not to ensure that you receive a fair deal – his job is to make the sale. Car dealerships are notorious for predatory high interest lending.

Tips & Warnings

• If you have bad credit, steer clear of dealer financing. Secure financing before you go to the dealership.
  

By jenajera eHow Community Member