Poor Credit Auto Loans
Use poor credit auto loans if you need an auto loan but you do not have the best credit.
For borrowers with a FICO credit score under 600, it can be difficult to find a traditional car loan. A credit loan for those with poor credit may be your only option.
If you have a low credit score and want to borrow money to finance a car purchase, you should take the following steps:
- Check Your Credit Report and Credit Score
- Save a Down Payment
- Purchase the Right Car
Auto Loans: Check your Credit Report
You get 1 free credit report every 12 months from each of the 3 major credit reporting companies. Make sure you check your report for inaccuracies, because you can request these requested.
You can also get a copy of your FICO credit score, but the FICO is not free. FICO is one of the key reporting features that a poor credit auto loan lender will consider. Your FICO is based on your credit reports, so make sure your credit report is accurate.
Auto Loans: Save a Down Payment
Buying a car with a low credit score is much easier if you have saved a down payment. If you have cash on hand to pay a 20% down payment, your car loan will have lower interest rates, more flexible terms, and a lower principal overall.
If you can save a down payment for your auto loan, you'll pay less money overall. Additionally, you can use a trade-in or a traded-in lease as a down payment (or a portion of your down payment).
Auto Loans: Purchase the Right Car
Make sure that you are trying to buy the correct car with your bad credit car loan. Most poor credit auto financers will not help you purchase:
- Motor Homes
- Conversion Vans
- Semi Trucks
- Salvage Title
If you are purchasing a light truck, a car or a van, you should be able to get a poor credit car loan.
Other options for buying a car if you have a low credit score
An auto loan is not the only option if you’re trying to buy a car.
Poor Credit Auto Purchase Options (in addition to loans)
- Buy with Cash
- Buy Used
- Do Not Lease
Buy with Cash
If you can pay cash for a car, pay cash. Any kind of loan ends up costing you more in the long run than a cash purchase.
If you do not have good credit, you might want to buy a used car. Paying less money overall for a car (even if you get a bad credit auto loan) makes it easier to repay your loan (because you don’t have to repay as much).
Do Not Lease
If you have poor credit, a leased vehicle may seem like a good idea. A lease is not a good idea.
Use a payday loan to purchase a car; then, once the term of the loan is done, you will own the car. With a lease, you won't get anything for the money you spend purchasing the car.