A car is a necessity that most people will need in day-to-day living. It is much needed for transportation, logistics and your ability to access places for work or leisure. However, some people suffer from bad credit which prevents them from purchasing a car through a loan.
Is it possible to get a car loan with bad credit?
The answer is yes. There are a lot of companies offering several options. If you’re thinking about buying a car by loaning, read further to find out your options given a bad credit score.
6 Ways to Get a Car Loan with Bad Credit
1. Hard Money Loans
Hard money loans are an option offered which is connected to your real estate. In this case, your house becomes the collateral for the loan. Based on the value of the real estate you enter, this will be the amount of money provided for your loan. Take this option if you are confident that you can pay your dues on time. The possible risk of losing your real estate may be high if you aren’t sure if you can pay these loans under the designated agreement. Given that, hard money loans are relatively easy on the approval process as long as you have a property to show.
2. Bad Credit Loans
Bad credit loans are an umbrella of options if you’re someone who has a less than impressive credit score. There are several different routes that you can go by to get a loan for a car. One of these bad credit loans is given by the Federal Housing Association. There’s also an option called VA loans, which are regulated by the US Department of Veteran Affairs. Another way is through Subprime loans, which have high rates of approval, but has a quite a steep amount of interest.
3. Peer to Peer Lending
If you feel like you won’t be needing as much cash to purchase your car but still need a loan to complete your payment, you may opt to try peer-to-peer lending. In this option, you can choose to borrow money not from a company, but from a private person who is enrolled in a peer-to-peer lending program. In this scenario, interest rates may be a little higher compared to somebody with a good credit score, but it doesn’t take much required to get to borrow money through this program. Websites such as Lending Club offers this option.
4. Pawnshop Collateral
Another way to gain money for your car loan is through community pawnshops. If you have some gadgets, jewelry, or anything else of value with you, you can use these items to borrow a sum of money for your car payment. Like the non-conventional loans, the interest rates in these types of processes are usually higher, but as long as they verify that your items are authentic, they will be willing to lend you the money you need for your car. Make sure to pay on time, or like the hard money loan, you can also end up losing the materials you gave in exchange for the cash.
5. Consider Pre-approval
To increase your chances of getting a car loan, you can sign up for a pre-approval process through a bank or credit union. Going through this allows the bank to look over your expenses, total income, actual credit score and see which loans you can qualify for. By having this paperwork at hand, you can go to dealers and have a higher chance of approval. Paperwork can work wonders especially if you have an imperfect credit score. This shows to dealers that you have done your research and prepared well to secure a loan.
6. Finding a Great Dealer
Some dealerships are ultimately picky when it comes to their clients. Your goal is to avoid these kinds of dealers. You have to find a dealership that is willing to work with your despite your credit score, and trusts in your ability to deliver. To do this, you can get a list of dealerships in your area and contact them about your situation. Usually, those who are willing will still give you more information despite your status. Given that you find somebody who can agree with you, make sure to secure an income to pay your mortgage on time.
Bad credit doesn’t mean that you lose your chances of getting a car loan. In fact, there are a lot of options available both online and offline where you can secure a payment for your car. Just be sure to read all the fine prints carefully, and be wary of signing off agreements. In this way, you’ll be able to get a good deal and drive your car home.