People with a bad credit score find it hard to access funds from traditional lenders such as banks making it hard to buy cars or houses. A study carried out by Experian Automotive found that the average credit score for car buyers approved by financial institutions in 2012 stood at 760. However, it is not all doom and gloom if your score is lower. Keep reading to learn how you can get a car loan with a poor FICO score.
Go for a Used Vehicle
If your FICO score is poor, you are likely to have a hard time convincing mainstream lenders to lend you money for a new car. The Experian Automotive study found that financial institutions require buyers of new cars to have a credit rating of 760 or higher. However, the credit rating for buyers of used vehicles is much lower at an average of 659 points. In fact, financial institutions have approved loans to buyers of used cars with credit scores as low as 550 according to figures published by Experian Automotive.
Check Interest Rates for Your Credit Score
Interest rates for car loans tend to vary depending on one’s creditworthiness. As such, it is advisable to check the amount of interest you are likely to pay based on your current FICO score. Fortunately, such information is readily available online at websites such as myCarAgent.com. This will give you a good idea of how much you will have to pay your lender every month.
Before choosing an auto loan lender, shop around and compare rates offered by other lenders including credit unions. At the same time, never sign a car loan deal on the spur of the moment especially at a dealership. Instead, get the loan documents and quotes, take them home, and go through them with a fine toothcomb.
Pay your Bills on Time
It is advisable to settle your debts on time for at least six months before applying for a bad credit car loan. This shows that you are working to clean up your act.
Getting bad credit car loans is not hard, especially if shop around, pay off your debts on time, and check interest rates corresponding to your current credit rating. For more information about car loans for bad credit, click here.