Poor Credit Car Loans: Focus on Factors other than your Credit Score
Buying a car is no simple task. You spend days looking for the perfect car model and negotiating the best deal only to find out your loan request has been rejected. Poor credit score can act as a blemish on your loan application. If you want to avoid the heartache of constant rejection, you need to showcase financial stability to the lender.
Strategies for buying a Car with Poor Credit Score
Majority of lenders seek FICO score for judging your creditworthiness. They analyze your credit report to learn more about your past loans, open lines of credit and payment history. If your credit score is in the 500-range, it means you have a poor credit score. But it doesn’t mean you cannot buy a car of your own. Your credit score is definitely the most important criterion for getting a car loan. But it is not the only one. When your credit score is weak, focus on the following things:
- Build a Strong Financial Base
When your credit score is not enough to convince the auto lenders of your capabilities, it is best to manifest a strong financial base. In today’s gig economy, when people do not have conventional jobs, providing proof of regular income can get difficult. However, you can use two years of tax returns to demonstrate your income. If you have been seeking too many deductions, your income may be really low to qualify for auto loans. In such situations, it is best to have a co-applicant with you.
- How much Money do you want to Borrow?
According to State of Auto Financing Market report for Q4 2018, a subprime borrower makes an average monthly payment $559 towards a new car. It is slightly low for user cars. You may have to pay $403 for a used car. And, the numbers don’t even include the monthly expenditure on cars such as fuel, maintenance and insurance. If you are looking to lower the monthly payments towards your auto loan, you have the following options:
- Trade-in an old car.
- Make a large down payment.
- Pay off debts if you have money to spare.
- Choose a car with a huge dealer incentive.
- Avoid extended warranties, credit life insurance and GAP insurance.
- Stay away from “Extras” such as rustproofing, paint sealant, etc.
- Negotiate the excess fees such as advertisement fees, dealer prep fees, etc.
- Your Employment History
Lenders will be interested in knowing more about your employment history because it will give them an idea about your income. If you have a history of changing jobs every now and then, it can act as a red flag. Also, a new job can deduct some of your points. Lenders require at least six months of employment history. In order to present yourself as a less risky applicant, you can do the following things:
- Get recommendations from your past employer and the current one.
- Stay away from changing jobs until you buy a car.
- Apply for an auto loan once your probation is over.
Poor Credit Car Buyers: Limit Your Search; Make a Quick Decision
Poor credit history may be a part of your current financial situation. But you can come out of the problem and still get a loan. Focus on strategies and remember to begin the loan process only when you have sorted your finances.
Remember one thing: Limit your search. Apply with a couple of different lenders. Check the interest rates offered to you and make a decision. If you wait longer than 30 days, all the credit inquiries won’t be considered as one.
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