untidec.icu

Many times, buying a car in a limited time becomes a necessity. You may require a new car for commuting to work or you might have to provide a car to your kid for college. However, due to a low credit score the process of buying a car may seem strenuous. But do not lose heart, because bad credit auto loans are available to you. In order to obtain a bad credit auto loan, it is necessary to understand the different nuances of the loan option in detail.

Breaking Down Bad Credit: Important Factors that need your Attention

A close comprehension of the following factors will help you in understanding bad credit auto loans easily.

1. Do you fall in the Range of Bad Credit?

A credit score is a way for a lender to judge your creditworthiness. A credit range or an average credit score is the score against which a lender decides whether you qualify for an auto loan and what will be the interest rate that you will pay. A super prime credit score is from 781 to 850 and is considered the best of the lot. Similarly, a prime credit score of 661 to 780 and is considered a good credit score to keep. However, for non-prime, subprime and deep subprime credit score individuals, the score below 660 is a matter of concern. Bad credit individuals should aim to bring their credit score above 660 for a greater chance of approval. It will also allow them some space to negotiate better interest rates.

2. Find out the Reasons behind your Credit Score

Bad credit is something that gets built up due to various reasons. Losing track of payments attracts bad credit scores. Additionally, delayed payments also negatively impact your credit score. The means to mitigate a delayed or late payment is to conduct an auto-debit system that will deduct the payment amount from your account on the date of payment. In extreme cases, the repossession of your car can also negatively affect your credit score. In order to avoid repossession, speak to your lender and negotiate an auto loan deal that allows you to make your payments more comfortably.

3. Improve Your Credit

A bad credit auto loan is an available option for you while you purchase your car. In order to have a smooth process, utilize credit boosting mechanisms before applying for an auto loan. The move will be greatly appreciated by the lender. A few methods to improve your credit score are to pay all your bills on time, work towards becoming debt free and keep low balances on your credit cards. Additionally, if there are any inaccuracies in your credit report, get them corrected before you apply for a bad credit auto loan. An effort towards building a strong credit score can help you by getting considerably lower interest rates and gaining a strong financial future.

Bad Credit Auto Loans – Easier Than You Think

A bad credit score does not mean that you will never get an auto loan. Bad credit auto loans are easily available today. Focus on making a big down payment, getting a cosigner and showing proof of a steady income. Once the above points are in place, obtaining a bad credit auto loan will be easier than you think.

The interest rate for bad credit car buyers will always be higher than a good credit individual. The primary reason being that a lender is taking a risk by lending money to someone who has difficulty in repaying the money or maintaining a healthy credit score. Before you step into a dealership to check out car models, you should check your credit score. It is the key element in deciding the amount of interest rate that you will have to pay for your car. Bad credit buyers should think one step ahead and ascertain the average interest rate according to their credit score in order to avoid any surprises later.

Bad Credit Score and Auto Loan Rates: How Bad is Really Bad?

Any credit score above 620 is considered to be decent and will attract reasonable interest rates. However, for people who have a credit score of 620 or lower, the credit score is considered to be poor. According to nerdwallet.com, a subprime credit score, which ranges from 501 to 600, will give you an interest rate of 16.14% for a used car and 11.89% for a new car.

While a deep subprime credit score of 300-500 gives you an interest rate of 19.98% for a used car and 14.41% for a new car. For credit challenged people, it is ideal that you build your credit score and bring it close to 601-660 so that you can achieve a lower interest rate on the purchase of your car.

Bad Credit Auto Financing Tips that Will Save You Dollars!

1. Check & Improve your Score

Before you start thinking about the details of your car, it is wise to check your credit score. Knowledge about your credit score will give you an estimated idea about the interest rate. If you have time before you apply for your auto loan, always take actions that will boost your score and help you to negotiate lower interest rates. Display a strong payment history by clearing your debt. Pay off credit card balances and keep them low. You should also avoid taking any new credit until the auto loan is approved.

2. Short Loan Term is Favorable

If you have suffered from bad credit history, do not go for a long-term auto loan. A term of 72 months or more will force you to shell out more money in the long run. It is because you will have to pay a higher amount towards the interest. Alternatively, choose a shorter term to reduce your financial charges significantly. An ideal term period is close to 60 months. However, bad credit auto buyers can even go for 48 month or 36 months to get a competitive interest rate.

3. The New Vs. Used Debate

The difference between a new car and a used car can be felt in the pricing as well as the auto financing rates. One may argue that new car loans come with lower interest rates and so it is wise to choose a brand-new model. However, the high cost of new cars can cause trouble. Individuals with bad credit should opt for used cars as the pricing is affordable and approvals are easy to obtain on pre-owned cars. Bad credit will hike up your interest rates than normal. Choose to go for a new car only if you are ready to make significant down payment.

Improve Credit Score to Decrease Auto Loan Rates

While an interest rate is decided on multiple factors such as the amount of the auto loan, term period and down payment, the most important factor is your credit score. Always make an effort to keep a consistently good credit score. Once you improve your credit score, your interest rates will automatically decrease and you can move forward to purchase your favorite car.