How to get approved for a car loan when you have bad credit

If you are reading this article, it is very likely that you have bad credit. And if that’s the case, then most conventional ways of getting a loan may be out of reach for you right now. That’s because banks and other lending institutions use your credit score to ensure they are not taking too much risk when they loan you money. Plus, a bad credit score may be temporary and the lender may not want to offer a short-term loan either.

Why is my credit score so important?

Your credit score reflects how well you manage your debt. In order to maintain a good or great credit score, your accounts must remain active and paid on time. When you don’t repay a debt, your score goes down. In addition, having excessive debt is another factor that lowers the score.

Why do I need a car loan?

A lot of people buy cars even if they don’t really need one. Some just want to upgrade their old cars while others may be looking for a brand new luxury car. But the bottom line is that you need to have a way of getting from point A to point B without depending on public transport or family and friends.

If you don’t have the money to buy a car outright, chances are you’ll need to get a loan.

How do I get approved for a loan even if I have bad credit?

The first step is to check exactly what your credit score is, and read through your credit report for any errors – if there are errors, make sure you get these fixed before applying for any loans.

Next, find out what your options are, such as getting an unsecured loan versus a secured loan and compare the pros and cons of each option (you can go online and research the different auto loans available). You should be able to find a lender who will offer a loan even with bad credit, but if not then you may want to ask some friends or family members if they can co-sign on the loan.

In any case, it is advised that you don’t borrow more than you need for the vehicle as monthly payments and interest rates are likely to be high.

What are my car loan options?

Here are your main car loan options:

Secured loans – these require collateral, such as the car you want to buy. You get a lower interest rate with this option compared to an unsecured loan, and they are normally used for new cars.

Unsecured loans – these are more expensive because they don’t require any collateral. But you can get them even if your credit score is not so good.

Make sure you check if there are any car loan deals specific to where you live, for example, if you live in Western Australia, you might want to check out car loans in WA to get the best deal.