If you need a car, but you have less than ideal credit, you may think that getting a car loan can be challenging. Fortunately, that is not always the case. Many companies are catering to those with bad credit and helping you get approved for a loan. The primary reason for this is because they can always repo and resell the car if you do not make the payments, making it a reasonably safe loan to make. However, if you have never attempted to get an auto loan with bad credit, you may not be sure what to expect from the process or how it will differ from getting a loan with good credit. Here is what you can expect if you are trying to get auto financing with bad credit.
When you have bad credit, you may find that most car dealerships will offer you in-house financing, rather than having a bank or credit union take on your loan. You may find a dealership who offers buy here pay here types of loans, or one who simply lends you the money directly from them. This is because many banks and credit unions won't take on the loan because of your poor credit history. This is important because the amount of interest they charge you is typically higher than what you could get from banks and credit unions. However, this doesn't mean you have to pay more in interest than you should. Take the time to call around and find out which dealerships offer the best in-house financing rate and then try to get approved there.
Needing to Provide References
When you are trying to take out a loan for a car when you have bad credit, you will typically need to provide more information than you would if you have good credit. The lender will want to know where you work, how long you have worked there, who your supervisor is, and need you to provide references of friends and family, including their name and phone number. Since they can't rely on your credit history, they look at your job history and references to determine stability. If you have poor credit and bounce around from job to job, it will be a lot harder to find a company willing to approve you because you do not have stability. However, if you have poor credit history but have a decent, stable income with a company you have worked at for five years and have references in the area, it will be easier to get approved for a car loan.
A Co-Signer May Come Into Play
If you have poor credit, another difference between getting a loan with good credit is that the lender may ask for a co-signer. A co-signer basically agrees to pay your car loan if you are unable to do so. This means that the lender has two different people to come after if the payment isn't made, which may increase your chances of getting approved for a car loan if you have bad credit. It is also important to note that the co-signer's name will be on the title of your car and they can take possession of the car at any time, so it needs to be someone you completely trust, such as a parent or sibling, rather than a boyfriend or girlfriend who you have an unstable relationship with.
Trying to get a car loan with bad credit is a different process than getting a car loan when you have good credit. You have fewer options and may end up paying more in interest. Knowing what to expect can help you prepare for the situation as best you can, so that you are not surprised by anything at the dealership. Contact a dealer like Leopardi Auto Sales for more info.