A car is a big expense, and most people cannot afford to buy a car outright. However, if your credit score is less than perfect, you may not have the easiest time finding financing. The top dealers don't always offer loans to those with poor credit, and your bank may not be willing to lend to you, either. There are bad credit auto loans out there, however -- you just have to know where and how to look. Here are four tips for low-credit car buyers seeking financing.
1. Apply at Smaller Shops
Instead of applying at big banks and the largest dealerships in town, focus on applying for credit at smaller credit unions and at smaller car dealers. Usually, smaller businesses give you more interpersonal interactions with the owner and employer. You will have more of a chance to explain your situation and why your credit is poor, which may convince the lender to offer you a loan. For example, if your credit is wrecked because your ex-spouse stopped paying a loan in your name, and you explain this to the lender, they may be more understanding.
2. Include As Much Other Information As Possible
Many lenders will check your credit score and then accept or deny your loan based on that score. Their application may not ask for other information, such as how much money you have in your bank account or how long you have been at your current job. However, you can still offer them this information and see if they will take it. Sometimes, with additional information, they will accept an application they would have denied on credit score alone.
3. Save a Down Payment
The less money you seek to borrow, the greater your chance of getting the loan. If you save a bit more money for a down payment, you will not have to borrow as much money. So, consider selling a few things, working overtime, or picking up some odd jobs for a few weeks to earn some extra cash to put towards a down payment on your car.
4. Ask Someone to Cosign
As a last resort, if you cannot get your loan application approved, ask if a parent or friend would be willing to cosign your loan. Someone with good credit can often cosign and get you a better rate -- or at least get your loan application accepted. Note that they will be on the hook if you stop paying your loan, so make sure you can truly afford what you are buying before asking someone to cosign.