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For Auto Loans

For many families, a car is a simple necessity of life. Most of us can't afford to purchase a vehicle outright, so a loan is also a necessity in most cases. That can create some problems if you're one of the many Americans that has a poor credit rating.

The good news is that poor credit doesn't mean you can't buy a car. It might mean, though, that you have to pay a high price to secure an auto loan, which is why you should be fully prepared and do your homework before shopping around to ensure you don't get overcharged too much.

These 11 tips will help you find the right loan for you no matter what your credit rating is:

Check Your Credit Report
It's important to understand what your credit report says about you. That's because it might not be as bad as you think, and a little work fixing it could go a long way further down the line.

The three major nationwide credit-reporting companies - Equifax, Experian, and TransUnion – can supply you with a copy of your report, and they are obliged to do so at no cost every 12 months.

Furthermore, the Federal Trade Commission publishes a useful guide to help you dispute any errors you find on your report(s).[1] If you notice any black marks that shouldn't be there, dispute them and get them off your report as quickly as you can.

Improve Your Score
Your credit report can be an incentive to get your outstanding balances under control and (eventually) paid off. Imagine the satisfaction you'll feel when applying for a loan knowing that your report is positive.

Start by focusing on accounts that you can pay off quickly and easily and in turn, obtain plus points on your report. If it means you need to delay your car loan until after you've got your score in order, then so be it. Improving your credit score will not only help you get a better deal on a car loan. You'll get better deals on credit cards, home loans, and more.

Car Loans and Home Loans are Different
Car loans aren't the same as home loans. That's because unless you've got your heart set on a Ferrari, a car loan is always going to involve less money over a shorter period than a home loan. So while your individual score might only qualify you for a subprime mortgage or alternative bad credit home loan, it could still secure you a prime or near-prime car loan.

Don't assume that you only qualify for loans specifically designed for people with poor credit. Applying for subprime loans when your score isn't that bad could see you burdened with a deal you don't necessarily deserve.

Shop Around
You should shop around before agreeing to any large financial commitment, and a car loan is certainly no exception. Some lenders will view your report more favorably than others, and not all will automatically tarnish you with the subprime brush. It pays to speak with as many as you can and get a good understanding of what your options are. Lenders that boast of catering for subprime loan candidates aren't always the best option. They could look to exploit your situation and employ predatory lending practices, which would lead to you losing out in the long run and even getting into a worse financial situation.

Start Close to Home
Before you head out to speak to a car dealer and discuss your financing options, consider the easiest route. Your bank probably knows more about your finances than any other institution. It has records detailing your income and expenditures, and your bank understands quite a bit about your financial situation. Your bank might approve you for a bad credit car loan when another lender won't. The same goes for your credit union. Visiting a car dealership with a pre-approval in hand gives you a much greater chance of securing a good deal.

Focus on Car Finance Lenders
It might sound like a subtle difference, but it's in your interest to seek out lenders that specialize in car loans rather than lenders that focus on subprime candidates. While you may find that many car finance lenders aren't willing to entertain applications from individuals with bad credit, some are. You may just have to settle for terms that aren't quite as attractive. Lenders that focus on subprime candidates, on the other hand, already understand the associated risks and will almost certainly offer terms that reflect and penalize your history.

Bring Some Support
Shopping for a loan can be intimidating, especially when your credit score is low. It's a good idea to take someone else with you for support. You'll feel more relaxed and not quite so alone while going through the application process, and a friend or relative can help you scrutinize the loan agreement and point out any terms of the agreement that you might have missed. It's always better to have two pairs of eyes look over a car loan agreement than one.

Notes
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