In order to get a bad credit car loan, you’ll need to secure automotive financing before you consider which car to buy. So, how do you get pre-approved for a car loan when your credit is less than perfect?
Financing First
You can – and should – get an auto loan before you find a car. This is especially true if you have imperfect credit. You won’t be able to walk into a dealership, pick the vehicle you want, and drive off with it. Instead, you should look to get pre-approved for financing because only certain lenders are willing to finance borrowers with bad credit.
If you have a current relationship with a bank or credit union, start with them first to see if they can approve you. If your bank or credit union is unable to get you pre-approved, your next step is to look for a subprime lender through a licensed dealership.
These special finance dealers know how to help buyers with imperfect credit get the financing they need. The problem is that not all dealerships have a special finance department or special finance lenders. For this reason, you don't want to get attached to a certain vehicle at a particular dealership. First, you need to find a dealership that can get you financed before you look for a car.
A Few Car Buying Tips
In order to help your chances of getting financed, you’ll need to get prepared and put looking for a particular car on hold. Planning ahead is important, so follow these three tips:
- Check your credit reports and credit score – You should know where you stand credit-wise. Knowing ahead of time gives you an idea of what to expect, and allows you to remove any inaccurate negative items that need to be fixed.
- Create a budget – Once you know your credit score, it’s time to budget for the auto loan. You can do this by using online tools and calculators to see how much your auto loan might cost you. Make sure the car payment plus insurance doesn’t exceed 15 to 20 percent of your monthly income before taxes. The last thing you want is to overspend on a vehicle.
- Prepare a down payment – Subprime lenders usually require you to put money down, so be prepared to budget for this. Generally, the minimum required is $1,000 down or 10 percent of the vehicle’s selling price, whichever is less. You can use a trade-in with equity for the down payment requirement, as well.
The Bottom Line
The best thing to do when going through the bad credit car buying process is to find financing first and save choosing the vehicle for last. Even if you’re confident in your car choice, you’ll want to make sure you get approved for a loan first and then see if the vehicle fits within your budget. If you have bad credit, and aren’t sure where to get special financing, we’ve got you covered.
At Drivers Lane, we specialize in helping people find local dealers that can help them get the financing they need. We work with a nationwide network of special finance dealers, who have lenders available that are able work with people who have no credit, low credit, bankruptcy, or even repossession. Taking the first step is easy, simply fill out our online auto loan request form today!
