According to CNBC, the average price of a car loan as of May 2019 had climbed to $36,718, with high interest rates around 6%.1 For most Americans, this is more money than they have on hand. Fortunately, if you’re interested in looking to buy a car with bad credit, there are options available to you.
Having bad credit certainly won’t make the car-buying experience any easier. It will likely require much more research, phone calls, and negotiating. Read on to learn more about how to get a car loan and be able to purchase a vehicle with a poor credit history.
Car Dealerships That Work With Bad Credit
When it comes to getting an auto loan, qualifications will likely vary depending on the dealership/financing company you use. There’s no industry standard for which credit scores to approve and which to deny. Individual lenders and dealerships make these decisions for themselves.
That being said, you may be able to get approved for an auto loan even if you have bad credit. But the terms you get will be better if your credit score is good. With bad credit, you’ll likely pay much higher interest rates. You also may not be offered as much money, and your monthly payments will likely be much higher as well.2
We recommend doing plenty of research before making your decision. Call plenty of dealerships to find out what their rates are. Also, be sure to ask what kind of credit score you’ll need for approval.
Buying a Car With No Money Down
For many Americans, putting money down on a new car may be difficult. This is unfortunate because the more you can put down upfront, the lower your payments will be each month. Much like with having a low credit score, the rates and terms you’re offered may be less favorable if you don’t put any money down.
It’s wise to save up some money so that you can make a down payment when purchasing a car. This will not only help you get better terms for a bad credit loan but will make your monthly payments more manageable.
If you can’t put any money down, you may be able to get better rates by using a cosigner. A cosigner is a third party with a good credit score, who promises to make your payments if you should fail to do so. Usually, a cosigner is a close family member or friend.3
Instant Approval Auto Loans
An instant-approval auto loan, or same-day auto loan, is one that you can apply for and get a decision on within the same day, usually as soon as the application is complete.
Many major banks offer instant approval auto loans, as well as some credit unions and other financial institutions. Just like with any other loan, it’s important to shop around when considering an instant approval auto loan.
Make sure that if you’re going to apply for a same-day auto loan, you have all of your documentation ready to go. You’ll likely need a valid ID, proof of income, bank statements or credit/banking history, and proof of insurance among other things.4
The Bottom Line
Buying a car can be quite expensive. If you have a bad credit score, or you’re currently struggling financially, you may want to consider buying a used car or even leasing.
There are many resources available where you can find used cars in your area. And while a used car may not last quite as long, it can be a good temporary solution that costs you much less in the long run.
To learn more about applying for loans, budgeting, and personal finance check out the rest of the CreditNinja Dojo!