Getting a Car Loan with Bad Credit and No Cosigner
The vehicle financing process alone can be tricky and intimidating, much less when you have damaged credit history looming over you. You can finance a new or pre-owned car more easily than you think, even with poor credit or no credit. Even more so, you can buy a great vehicle independently, without using a cosigner to facilitate the financing process. Don’t let your credit score determine your credit future. Follow our guide to the bad credit car financing process to buy the car, truck, SUV, or van of your dreams!
About Bad Credit
Bad credit happens to good people. A few short paychecks or missed payments can set you off track of a clean financial history report. Unfortunately, bad credit can impact your ability to make large financing purchases like a mortgage, affect you negatively in securing a credit card, or even affect your car financing process. There are a few common credit mistakes that can deeply continue to impact your credit history and keep you from realizing better credit. It is an important step in the car financing process to become aware of your credit history and to realize the role that it will play in your auto financing options, and secondly to take steps to remedy the situation and stop making credit mistakes that further damage your credibility to lenders. Bad credit isn’t a stamp of disapproval from auto loan lenders. You can click here to see loans that you qualify for!
You pay off debt collectors first
Paying all debts off is a sound plan for reestablishing credit, but the unfortunate reality is that many of those in debt are forced to pick and choose which bills are payed off first. Keep this in mind, old debt has already been added to your history report, while new debts have yet to register until you default on your payment. Paying off bills as they are due is a good way to ensure that new items are not added to your credit history report. The more hits you take to your credit score, the more risky you look to lenders when you apply for auto loans. Once you have secured your auto loan, you want to remain in good standing with your lender by making your regular monthly payments on time every single month until the full loan amount has been repaid. A good way to ensure that you stay on track with making your regular monthly payments is to set your loan payment to auto draft from your bank account or from a debit card. You want to avoid missing a car loan payment at all costs, or risk further damaging your credit and avoid falling behind on payments.
You don’t check your credit history report
Not checking your credit history is an unhealthy practice that can strongly affect you when you attempt to finance a car. Too often buyers are surprised by items that register on their credit history, and it’s not until they are attempting to make a large financing purchase, like a car, that they become aware. Don’t be barraged by your credit history. Looking at your report prior to shopping for a car can help you make responsible financing decisions, plus it will help you better calculate the loan interest amount that you can expect to pay to finance your new or used vehicle. Once you know what’s on your credit history report, you can work to clean up your credit. Look out for and remove any errors on your report. Close old lines of credit and pay off bills that you owe on. Try to pay off high-interest credit cards, in particular before applying for auto loans, so that lenders will see you as a lower risk and you will qualify for loans with better terms and lower interest rates. Taking these steps to learn more about your credit history will help you rebuild your credit and qualify for loans with better terms in the future. You can run a quick and free online credit history report on a website like Transunion or Equifax.
You maximize your lines of credit
Financing institutions look at several factors when reviewing your credit history for approval for a loan. Utilization is among one of the biggest factors that lenders review when calculating the risk of lending to a buyer. Utilization is calculated based on the amount of available credit on your open lines of credit that is in use. For example, if you have a $200 credit limit and you have charged $100 then your utilization rate is 50%. A high utilization is seen as a risk to lenders, in particular in relation to your income to debt ratio. This means that if you’re charging a high amount every month, particularly if you aren’t able to pay off your monthly balance, you might be doing harm to your credit score. Avoid spending more than you make monthly, even if you charge the amount to a credit card with the plan to slowly pay off the balance. Utilization is calculated both for each individual line of credit, and across all lines jointly. Having a high utilization can negatively impact your credit score.
Can You Get a Loan Without A Cosigner
Finding a cosigner may be challenging, in particular if those around you don’t have great credit or simply cannot cosign for you. You don’t need a cosigner to apply for an auto loan in Your State. While financing with a cosigner may help you qualify for loans at better interest rate, you can secure a loan to finance your next car without finding a cosigner. Financing a car can be a positive way to rebuild damaged credit, assuming that you make regular payments, pay off the loan in a timely manner and remain in good standing with your lender. Your income can be the proof that lenders need to finance a car on bad credit without a cosigner. Also, providing a down payment and/or a trade in can also help better facilitate the financing process. Furthermore, financing an auto loan without a cosigner puts you in full control of the financing process and gives you instant access to financing options that are available to you based on your credit. Simply pick the car that you want and research car loans that can help you finance the cost.
Ways to Secure a Bad Credit Car Loan
- Look at your credit history report. The better your credit score, the better the loan offerings will be for you. A better credit score will qualify you for a loan at a lower interest rate, or even promotional offers from lenders. Those with bad credit may qualify for loans with a moderately higher interest rate because lenders see buyers with high levels of debt and low credit scores as a higher risk than those with better credit. Don’t speculate on your credit score, do a simple and free check on a site like Transunion prior to applying for loans. Many buyers are surprised by old lines of credit or even mistakes that have profound impacts on their credit history, and in turn on their financing process. Failing to do your research prior to walking in the dealership can slow down or stall your car purchasing process.
- Don’t borrow more than you can afford to repay. Your ideal calculated monthly payments should reflect your financial reality, or you risk building negative equity or even worse, you risk putting yourself in a financial bind. When calculating your monthly payments, you must factor in your interest rate and the term of the loan to give you a more accurate picture of how much you can expect to actually pay for your new vehicle. Looking at the sticker price of a car alone won’t give you the full cost of a car. Your car payments include the cost of the car, plus interest payments, tax and title costs and other administrative fees from closing the car sale through a dealership. Think also about the cost of car ownership, including factors like insurance, routine maintenance, upkeep, gas and more. Calculating your monthly car payment helps arm you with a starting point for when you begin looking for a car that you want to purchase.
- Shop your financing options. Many buyers with bruised credit make the mistake of assuming that they won’t qualify for many, if any, loans at reasonable rates. The truth is that there are loans available to those with bad credit, to help finance a new or used car. You aren’t obligated to go for the first loan option that is made available to you, and you aren’t stuck only directly financing through a dealership. Shop around and learn about the different options for you. Ideally, you will find a loan with a reasonable interest rate that you can pay back in a shorter amount of time. Give yourself time to review all of your loan options and assess which financing option works best for your needs and lifestyle. You can see which loans you qualify for in Your State.
- Look at both the length of the loan and the interest rate. Too often buyers get trapped in long-term or high-interest loans in order to keep their monthly payment lower. This unfortunate trap makes it feel like a buyer is paying less, when in reality they will pay more over time for a car. Think of it this way, if you take out a loan for $10,000 at an annual percent interest rate of 8% for 36 months (3 years) your interest paid on the loan will be $2,400 and your monthly car payment will be $344. If you take out the same $10,000 loan at 8% APR but you stretch the payments across 90 months (7.5 years) you will pay a significantly lower monthly payment of $177, which looks attractive upfront, but the interest you will pay across time is $6,000, more than double what you would pay for a loan repaid across 36 months. Plus, if you factor in depreciation, you will be paying more for a car that is worth less and less- an inverted effect that doesn’t rebuild credit effectively. Assess what type of car you need and want and determine your financial goals both short and long term. Pick a loan that allows you to pay manageable monthly car payments for your budget, while allowing you to pay off your loan within a reasonable amount of time. Balance is key when assessing which loan terms and interest rate is right for you.
Finding a Good Loan Based on Your Credit History
There ARE financing options for those with bad credit to secure a car loan. Don’t let your credit history discourage you from applying and being accepted for loans to finance the car of your dreams. You can qualify for bad credit auto loans that will help you finance a new or used vehicle without hassle. In a few simple steps, you can access lenders that will provide you will bad credit auto loan options. What kind of vehicle appeals to you? A trendy Jeep, sleek Chrysler convertible, chic BMW, practical Honda minivan? You can finance the vehicle that fits your wants, needs and budget.
You can apply and qualify for auto loans by simply meeting a few simple criteria. Your income can qualify you for a loan that will help you finance your new or used vehicle. You only need to meet THESE three qualifications to apply for an auto loan.
- You make a minimum of $1,800 in monthly income
- You have a valid driver’s license
- You are able to obtain car insurance
If you meet these three benchmarks then you can apply for and be approved to finance a car, truck, SUV or van. In one minute you can see the loans that are available to you!
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