“Usually, people with very good credit scores can avail an auto loan with 3% lower rates as compared to borrowers with bad credit. Earlier it used to be difficult for people with bad credit to avail auto finance, but today, the rare auto loan lenders that offer guaranteed auto loan approval for bad credit. Youjustneedtosparesometimetoexplorevariousoptionsandfindthelendersthatcouldofferyouautoloanwithbadcredit.”
Looking a guaranteed auto loan approval for bad credit would possibly mean that you would be required to spend a little more time to avail of one. The steps to search for these kinds of auto loans would nearly be the same as a normal auto loan where you would want to go around shopping for the auto loan as well as comparing the different quotes that you receive from multiple lenders and get your desired car.
However, having bad credit might end up costing you more then the normal loan for people with good credit since the auto loan lenders tend to charge higher rates for lending auto loans to borrowers with bad credit.
Here are a few steps that you may want to consider for getting a guaranteed car loan approval with bad credit:
1. Accumulate larger down payment
Usually, around 20% down payment is required to be made while purchasing a car. However, when you have bad credit, the larger the down payment you would be able to make, the better would be your chances for being approved for an affordable rate of interest despite the bad credit. This is because the more the amount you pay as down payment, the lower would be the amount you would owe compared to the value of the car, i.e. Known as a loan to value ratio. Also, you would be seen as a less risky borrower since your down payment will prove that you are a responsible and mature borrower.
2. Know your exact credit score and try to improve the same if you have some time
It is advisable to check and know your exact credit score well before you start looking out for guaranteed approval car loans for bad credit. This would help you to get a rough idea about where you stand on the credit range. Several lenders would have a requirement for a minimum credit score. Therefore, if you were aware of the same, it would be easy for you to filter out the auto loan lenders that would be able to offer auto finance.
According to FICO, a credit score below 579 is considered as very poor, a credit score between 580 and 669 is considered as a fail, a credit score between 670 and 739 is considered as good, a credit score between 740 to 799 is considered as very good while the credit score above 800 is considered as exceptional.
If you have some time then you may want to consider postponing your purchase to repair your credit score.
3. Calculate your Budget
It is very essential for a borrower to identify a budget for his car purchase. If you know your affordability to spend on car repayment each month, you would never default on your auto loan. In order to find out a budget, you must look at the expenses you incurred in past couple of months or a year or two. In addition, you may list down all of your monthly expenses that are recurring including your bills, debt repayment or savings for achieving your goal such as retirement planning. Once you have an amount for your expenses and savings, you should subtract that from your monthly income and see what is left with you. This would help you realize what you could afford to pay as car repayment each month and accordingly you could look for lenders offering fast auto loans.