How to Get Approved for a Car Loan with a Bad Credit History . Car loans are easier to get approved for than other, unsecured lines of credit because they are secured by the car you purchase. So, even with a bad credit history, it’s possible to get approved for a car loan. This article offers tips on getting approved for a car loan with a bad credit history:
Make a Down Payment
If you have a bad credit history, lenders are going to want to make sure that, even if you don’t pay your loan, they can resale the car and get their money back. For this reason, it’s important that you take out a loan for less than the car’s appraised amount. For example, if the car you’re buying is worth $15,000, you’ll want to borrow less than that amount. Usually that means making a significant down payment. Making a down payment makes you less of a risk to a borrower, therefore improving your chances of being approved.
Use Online Search Engines
If the only place you search for a car loan is the car lot, then you’re not going to know whether the rates they’re offering you are reasonable or not. Dealerships are notorious for telling people that they cannot get approved for a better loan because of their credit when, in reality, this is not true. Even with a bad credit history, on a secured loan you should be able to get a decent interest rate. Shop online before going to the car lot and get an idea of what type of loan you can get from other lenders.
Clean Up Your Credit
In the months before you apply for a car loan, make timely payment on your other credit accounts. Even if you just have a few months of timely payments prior to applying for an auto loan, it will look much better than applying for a loan with recent negative reporting from your other creditors. If you can prove that your bad credit history is a thing of the past, a lender is much more likely to approve your car loan.