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    Bad Credit Auto Financing

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    Having bad credit can do more than weigh you down; it can make you feel like things are out of your reach. If you have bad credit but need a loan to make a purchase, like buying a car, there are things you can do to make it possible.

    We’ve gathered data about the auto loan rates available, not just for good credit scores but for bad credit too. We also reviewed the information you need, what the process involves, and what you can do to get the best car loan for you.

    Here Is How You Buy a Car With a Bad Credit

    Having a car to meet your daily needs can be essential. However, taking out an auto loan when you can’t afford the monthly payments can lower your credit score even further. Prepare for the process using the following steps, and you can improve your credit score by making your payments on time.

    Before You Buy, You Should Research:

    Your financial circumstances need to be the first thing you consider. Look at how much you have coming in each month, your outgoings total, and how much you can realistically put towards monthly payments. This might mean cutting back on other items, but don’t stretch yourself too thin, as this will decrease the likelihood of making the monthly payments.

    Get as much information about your credit score as possible. You can get an annual report from a credit bureau, such as Equestrian or Experian. The report is free, all you need to do is enter some personal information, and the system will generate a report.

    You will need to set a budget. Once you know more about your financial circumstances, you can start to research the costs involved in buying and running a car. Explore how much you will need to borrow for the loan, then calculate the monthly payments required to set your budget.

    Take Into Consideration Credit Card Score and Report

    A FICO score over 700 is a good sign, and you should have some options for car loans. If your score is below above 600, but below 700, you could consider taking some time to improve your credit score by reducing your debt.

    Scoring under 600 could mean you will find it challenging to find a lender. This isn’t irreversible, but you might need to consider using a credit repair company or asking someone to cosign your loan.

    Know Your Budget Limits

    If you don’t know how much everything will cost, you can get some help to understand all of the costs and the monthly payments. You can use an auto-finance calculator to see how the total amount can be divided into monthly payments over time or vice-versa.

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    Familiarize Yourself With the Terminology

    Car loan terminology can feel like another language! Here are a couple of terms to get to grips with:


    This stands for annual percentage rate. It shows you more than the rate of interest you will pay. It shows you the yearly cost of funds over the term of the loan. That means that fees or additional charges are also taken into account.

    Loan Terms

    The term of the loan is the period that the loan covers. For auto loans, you usually borrow a specific amount, which needs to be paid back over a specified period. It should not be confused with the loan terms and conditions, which are the details in the contract that you agree to, regarding the repayment of the loan.

    Money Down and Trade-in

    You can decrease the cost of a car or the amount you borrow from a dealership by paying a percentage of the purchase price upfront, also known as a down payment. Another option is to trade in an older vehicle to receive a discount on the price.

    Car Loan Cosigners

    If you don’t meet the eligibility requirements for a car loan, you can ask someone with a regular income and a better credit score to cosign the loan. The person cosigning is agreeing to pay off the debt if the monthly payments are not met. You’re both responsible for repaying the loan.

    Funding a Car With No Credit History or After Bankruptcy

    Bankruptcy can stay on your credit report for many years, sometimes up to 10 years. This could make getting an auto loan difficult, but not impossible. The most important consideration in the next step is not to accept a loan that seems too good to be true, such as no credit check. This could leave you with a loan that is more than the vehicle is worth.

    If you have no credit history, you might need to consider subprime lenders who offer high-interest rates or asking someone to cosign the loan. If you have no credit history or if you have filed for bankruptcy in the past, a loan from a credit union could be a good option. Their membership requirements could be less demanding, and they will help you rebuild your credit.

    Choosing the Vehicle for You

    Your vehicle needs to suit your needs, but it also needs to be within your budget, an acceptable model under the terms of any prospective loan. If you are seeking finance through a dealership, you will need to choose based on dealers that lend to those with bad credit - see more below.

    Test the Water

    Since a low credit score might make it more difficult to find a lender, it is even more important to shop around. You can complete soft credit checks with lenders to find out more about their rates and terms before continuing.

    Stay on the Couch

    Sometimes the best way to find a lender that will lend to those with a lower credit score is to find direct auto loan providers online. Researching several different websites can give you more options to consider.


    You can find a dealership that will offer purchasing agreements despite the bad credit. Be careful with Buy Here, Pay Here dealerships, as there might be terms that you find difficult to meet. You can find local dealers using Auto Credit Express.

    Make an Educated Decision

    Always check the terms and conditions of your loan. Even though you have bad credit, you shouldn’t feel like you don’t have options, and therefore need to accept a deal that you can’t manage.

    Use the information from the auto loan calculator and your research to make the best decision for you.

    Bottom Line

    Bad credit isn’t the end of the road for your chance to get an auto loan. With the advice listed above, including the right research and preparation, you can get a car loan with monthly payments you can manage.