Your credit score that relies on your credit history is the only benchmark for your potential lender to determine if you qualify for a car loan and on what terms. If the score is terrible, you are less likely to be extended the credit. Even if you are able to avail the facility, it will be on terms that can sometimes cost you a fortune. It would be prudent for you to know your credit score before approaching a bank or any lender seeking car finance. It is no good for your prospects if you have a bad credit score. Here is what you should do in that case. You also have to take a look that how often financial market will look in this year.
- You are most likely to be aware of your credit history. Still, you can ask your bank for your credit score check and report to know your position before applying for a loan. This will help you in understanding the amount you can get and rate to be charged on the facility.
- Once you have become aware that you have a bad credit score, you ask your bank advisor about the loan options, including APR (annual percentage rate), to know whether you qualify for a loan and what would be terms. Your bank might be willing to finance your car, but terms could be almost unaffordable.
- After talking to your bank advisor, you would probably know by then where you stand financially. You can further do research online to know more about the market rates of car finance with a bad or less excellent credit history. Do a short analysis of the finance and payment options, especially if it comes with hefty terms.
- You should also explore the market further by visiting more than one lender. By starting with your bank, make inquiries with other lenders. The market has very stiff competition on car loan options, and there could be some lenders willing to negotiate better terms with you. Again, it will depend on your credit history. With a history of regular defaults in payments on credit, you stand no or less chance to get a loan facility on your terms.
- Once and if you have failed to attract banks to fund your car purchase, seek help at credit unions. The unions are non-profit organizations, generally run by their members, and they can help you out of the bad credit score situation and extend you a car loan facility. You can also use the loan to do start up. People even learning to get business start up these days.
- When you have exhausted all other options and failed to secure a loan, subprime lenders are the only choice left for you. These lenders specifically cater to the financing need of people with a bad or less favorable credit score. You should consider this option very carefully. You can quickly get a car loan from a subprime lender, but their interest rates are very high over their competitors, i.e., banks.
- Read and understand all terms thoroughly before committing yourself to the signing of the agreement. You must be sure that you can honor the payment commitment. Otherwise, it will further damage your credit history.