Having a poor credit history doesn't mean you have to rely on public transportation or drive around in a much older car. While big dealerships may not approve your application with poor credit, there are tips to help you qualify for an auto loan.
Benefits of a Subprime Lender
Buying a car from a dealership that specializes in bad credit auto loans, or using a lender that issues loans to borrowers with bad credit, can help you obtain an auto loan. Visit dealers and finance companies that advertise "fresh start" or bad credit loans.
Importance of a Co-signer
Co-signers are valuable when applying for an auto loan with bad credit. The person chosen to co-sign your agreement must have a good credit rating and income to pay the car payment if you're unable to meet the obligation.
Solution
The automobile serves as collateral for vehicle loans. Thus some lenders are more prepared to approve an applicant with poor credit. As a trade-off, bad credit applicants usually must agree to a higher interest rate on the loan.
Warning
Shopping around and comparing auto loan finance rates is helpful because dealerships may offer financing with higher interest rates than you could obtain on your own. In addition, some subprime lenders charge exorbitant rates when an applicant has a bad credit history. Checking with your local bank or credit union beforehand can help you avoid predatory practices.
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