If there is ever a time to check your credit report and credit score, it’s before you apply for a car loan. Unlike mortgages or credit cards, you can usually get a car loan even if you have pretty bad credit. You will only have to pay back a lot more in interest charges. If you have a bad credit score, you probably will be happy to just get a loan and won’t bother asking the lender for a lower rate. But, it’s important that you try to lower your rate – even if your credit score is nothing to write home about!
Remember that your car is not like your home – it’s value doesn’t increase over time. In fact, the value of your car will start depreciating the minute you drive it off the dealership’s lot. Given this, why would you want to spend more than you should on a car loan? Here, we tell you how you can get a car loan at an affordable rate even if your credit is quite shaky.
The lower your credit score, the more important it is that you shop around and compare the loan rates offered by different lenders. Yes, you may need to pay more than someone with excellent credit does, but you certainly don’t have to pay whatever interest the dealer quotes you.
Get Financing Quotes Before You Visit the Dealership
If you have good rates, you can usually get an excellent quote from the dealership. But, if you don’t have an impressive credit score, it’s a good idea to get quotes from online lenders and credit unions since they offer better rates in comparison to traditional lenders. What you’re trying to do is have an offer in hand so you can negotiate with the dealership for better terms. If the dealer offers you a better rate, you don’t have to go ahead with the loan offers you have on hand.
Make a Higher Down Payment
If you don’t have a great credit score, you pose a risk to the lender, which is why they charge you a higher interest rate. You can bring your rate down by making a significant down payment. Aim to pay at least 20%, if not more.