How To Get A Car Loan With Bad Credit | Eric Finance

If you have bad credit history, it can be difficult to get a loan or sign up to a finance deal, which could cause problems which it comes to getting a mortgage or buying a car, but there are things you can do, so do not despair.

One of the first things you should do when thinking about getting a new car is to work out your budget. It may also be useful to check your credit score so that you have a realistic idea of how much, if any, you will be able to borrow. When you calculate your budget, you must consider monthly outgoings and incorporate additional costs associated with owning a car, such as insurance, road tax and maintenance. Work out how much you can afford to spare each month and this should give you an idea of how much you can borrow without making your life difficult.

Improving Your Credit Score

If you have poor credit you may be turned down for a loan, so it may be worth taking steps to improve your credit score before you apply for a car loan. Your credit score predicts your ability to pay back debt, so if you can show that you are able to pay bills and loan payments on time this will improve your score. Make sure you pay all your bills on time, keep up to date with loan repayments and pay off your credit card each month.

Avoid applying for your car loan until your new credit report has been submitted. If your score is higher, your loan request is more likely to be accepted.

Once you have successfully secured a car loan, you can continue to improve your credit score by keeping up with payments and paying bills in full, on time.

Save Up

Try to save as much money as possible so that you have a down payment and need to borrow less. You are more likely to be given a lower amount if you have bad credit. Banks and building societies are not likely to lend you a large amount of money if they think there is a risk that you will not be able to pay it back.

Shop Around

There are organisations which deal specifically with customers with poor credit and it can be tempting to run straight to these firms as there is a higher chance of acceptance. However, they will charge you a higher interest rate and you will end up paying more, so try to improve your credit score and apply to a traditional lending company first. If you get turned down you can then look at other options.

It is best to proceed with caution if you are considering taking out a loan from a company that offers money to people with poor credit history. Check the small print and the details of the borrowing agreement. Often, the interest rates are very high, meaning that you will pay hundreds, if not thousands, more every year.

To conclude, it is possible to get car loans with a co-signer, who will accept all responsibility for the payment. However, it is important that you are sure that you are able to afford the payments, as your co-signer will suffer the consequences if you default and the company may even sue them if you cannot afford the outstanding balance.

Source: http://www.ericfinance.com/car-loan-bad-credit/

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