You have just received a response from an auto loan company that your application has been declined. According to the lending officer, your loan proposal has been rejected because of your bad credit history or low credit score. The lending company you submitted your car loan application to only accepts customers with good credit rating and obviously, you did not meet the lender's criteria. What can you do?
Subprime Car Loans for People with Bad Credit
If your credit score is below average, then you fall into the subprime category. Does that mean you can not get the car financing you need? Not at all! Many lending companies in the market do offer financing for the subprime market or consumers who are credit challenged. Even with bad credit, you can still get approved for a car loan but you need to find the right lender.
Do subprime car loans mean high rates and fees? Because of the greater risk involved, lenders may charge a little more on interest rate for this type of loan. But that does not mean you should settle for an unreasonably high rate or unfair terms. Even though you need to improve your personal credit score, you still deserve fair treatment.
Car Loan Tips for Consumers with Bad Credit
How can you get approved for a car loan if you have bad credit? More importantly, how can you find a car loan lender that offers a reasonable rate despite having bad credit? Consider the following tips:
Check out credit unions. It's a good idea to check out your local credit unions for possible car loan financing programs. Credit unions are more likely to offer a much lower rate than what commercial lending companies offer even for consumers with bad credit history.
Check your credit report. If you've been denied financing because of your credit rating, you should immediately check your credit report. Order your report from each of the three major credit bureaus – Trans Union, Experian and Equifax.
See if there are errors or misinformation which could have caused your score to drop even more. If you do find errors, send a letter to the bureau that issued your report and request for corrections. Once the errors have been corrected, you might be able to raise your credit score significantly.
Watch out for predatory car dealers. Some car dealers that offer financing deals are after only one thing – making sales and making profit. You may be offered an attractive deal and easy approval regularly your bad credit but once you signed up the contract, you might be informed that you did not qualify for the low rate because your credit score. You may end up paying an expensive loan because you've been ripped off by an unscrupulous car dealer.
Shop around and compare deals. In order to make sure that you've found a good deal, you should gather quotes from at least three to five lenders and compare the rates and fees. Use the internet to request for quotes for free. Use these quotes to narrow down your choices. Afterwards, be prepared to examine the background, terms and conditions of each prospective car loan lender.