Bad credit score can harm your chances of car loan approval !

It is wrong to think that with a bad credit you won’t ever be able to buy a car, but this also doesn’t mean that you think you’ll get a car loan as per your own terms and within your monthly budget. Getting a car loan with bad credit is not impossible; it is possible but not always on your terms. You’ll have to compromise on some of the terms of the loan. It also depends on how bad your credit is, like if it borderline some lenders might still see you as a prospect and would be willing to take the risk.

Checking your credit report: 

It is not uncommon to have errors in your credit reports. So it is better to check your reports beforehand to see if there are any errors which may have reduced your score. If there are any errors, correct them before you apply for a loan. This can save you time as well as money.

Improve your credit score:

Some people are on the borderline of good credit and bad credit. In such situations it is better to wait and improve your score before applying for a loan.

Have realistic expectations:

You have to realize that though you’ll be able to get a loan, you are likely to pay more due to higher interest rates than a person with a higher credit rating. Accept your situation and aim for cars which are not out of your financial situation. Also, accept that since you have a bad credit, you are obviously going to miss on some attractive loan offers so it is advisable to go for less expensive cars which are in your budget and wouldn't lessen your chances of getting a loan.

Payments paid off:

Having unpaid payments is always a bad idea before applying for a loan. Even though the lender is willing to give you a loan despite your bad credit, the unpaid payments won’t go well with him. So, pay off almost all in the months preceding your loan application. Your payments records should be clean at least for 6 months before you apply for a loan.

Check your options:

Since, you are not so well with your credit, you are obviously going to get loans with higher rates but accepting and settling with the dealer financing your loan without looking at options may prove to be harmful. Yes, the dealer does want to sell his car but he may also be looking for profit in the financing you are likely to get a higher rate with the dealer. Check out with financial institutions, credit unions, your bank and the loans they offer. Compare their interest rates and other terms and choose which would suit you the best. It is better to secure your finance in advance, before you go to the showroom for car.

Get a CAR (Cibil Analysis Report) from www.cibilconsultants.com and then own a car !

Source: Secondary