Get your Car loan approval with Bad Credit!
Is your credit really that bad? It might be better than you think. If you walk into a car dealership without knowing your credit history or credit score, you are at their mercy. They can basically tell you whatever they want and it will cost you if you get approved at a high interest rate. Some car dealers will lie to you and tell you your score is lower than it is, thus justifying why your interest rate is so high. They get a kickback from the bank for getting you approved at a higher interest rate. First and foremost you most know your credit score. Do not rely on the free credit reports because they will not give you your score. I recommend Equifax and TransUnion.
Personally review your credit report. There may be some things on there that will greatly affect your interest rate. Some bad credit can be corrected. First and foremost get rid of any bad blemishes you can dispute. Close any open credit cards you don’t need or use. Pay down or pay off your debts and credit cards. Do not blindly apply for a loan and get declined or get a high interest rate because of factors you can control. If your score is below 620 you will a sub-prime buyer and you will pay the higher interest rates. Each lender has its own definition of what constitutes a sub-prime borrower.
There are many lenders that will finance people with bad credit or with credit blemishes on their credit report. It’s in your best interest to get pre-approved before you go to the dealer to buy. This way you know exactly what interest rate you should be paying. You will also know the exact price range of the vehicle you can afford which will greatly help you in the vehicle selection process.
If you want to use the dealer for financing.
It’s ok to use the dealer for your financing as long as you are prepared. Have a copy of your credit report in your hand so they cannot lie to you about your score. Know what the current loan rates are and let them know you will not accept a higher rate. Be prepared to get up and leave if they won’t meet your demands. Most dealers have access to many lenders, many who do not deal with the public, only with Car Dealers.
Here is a list of questions you must ask when in the finance office:
1. What is the exact price I am paying for the vehicle?
2. What is the total amount of money being financed?
3. What is the dollar amount I’m paying for the credit (finance charge)?
4. What is the exact amount of each payment?
5. What are the total number of payments?
6. Don’t Fall for this Trick: Is this deal and finance rate subject to getting later approval of the financing from a third party? Watch for the “Subject To Financing” clause on the contract. This is where they get you. They send you home with a so called approved deal and call you several days later to inform you that the financing fell through and they can’t get you the rate they quoted, but they found a lender who will give you the loan at a higher interest rate. Make sure the deal is approved by the lender before leaving the lot. If there’s any question, tell the dealer you’ll come back and get the car when everything is settled.
7. Is there a pre-payment penalty if I pay this loan off early?
We advise you to apply for the car loan online. This allows you to get approved from the comfort of your home or office and not have to sit around at a car dealership for hours. Once approved you can focus on the selling price of the car OR focus on finding the best vehicle at the agreed monthly payment.
Buy Here Pay Here as a last resort
You’ve tried every lender and have been denied. You have looked at your credit report and know why you are being denied or somebody has carefully explained what the issue on your credit report is stopping you from getting approved. At this point you must decide how bad do you need a car? There is one final way to get a car. There are some “Buy Here Pay Here” dealers that will finance you but be advised: They may not report your payments to the credit agencies thus no credit repair is occurring! Be very careful that you are buying a quality used car or you will end up with a piece of junk that is in the shop more than on the road. Many of the smaller dealers buy unwanted auction and wholesale cars that may not be in very good shape. We advise you to deal with a large franchise dealership that sell quality used cars that offer in-house financing. Always explore your options before you sign anything.
Bring the right paperwork to speed up the process. Most dealers want the following paperwork when you process a loan with them. Have the following items in your folder when you arrive at the dealer. Drivers License, Proof of Auto Insurance, Financial Info (bank and credit card account info), Social Insurance Number, References, Void Cheque, Proof of Income from paystubs or bank statements, Proof of Residence – usually more than one piece, Current phone bill or other utility bill, and the agreed upon down payment. We advise you to call the dealer first to get an exact list of what they require.
Repair and improve your credit!
Bad credit can be fixed. It takes time but it is worth the effort. Although you may be in a high interest loan today, if you work hard at improving your credit your next car loan will be much lower. Watch out for credit repair companies that promise to fix your credit fast. If you are going to use a credit repair company make sure they are reputable.