If you have a poor or a damaged credit history, you might be concerned about whether you will be able to obtain a car loan.
While a poor credit history can make it challenging to obtain a loan, it’s certainly not impossible. The best way to increase your chances of getting a loan for a vehicle is by understanding your options ahead of time.
Today we’re going to share a few funding options for those with poor or damaged credit histories that want to successfully secure an auto loan.
1. Get a Cosigner
If you have less than perfect credit history, consider getting a co-signer to strengthen your application. A cosigner is a person that agrees to apply for the application with you.
By doing this, they become equally responsible for making the loan payments. A good cosigner is one who has an established credit history and functions to give lenders peace of mind for individuals who don’t have the best track record.
Should the primary applicant miss payments or default on the loan, the responsibility will fall on the primary applicant and cosigner.
2. Increase Your Down Payment
Another alternative to obtain an auto loan is to increase your down payment on the vehicle.
If you have extra money that you can allocate to your vehicle, this is an excellent option to take advantage of. It might be difficult for buyers with poor or damaged credit history to get financed for a relatively large amount of money.
But this doesn’t mean that the lender won’t be willing to finance you a smaller amount. Increasing your down payment means that you will have less you need to borrow. Not only that but a larger down payment shows lenders that you’re serious and ready to pay.
3. Consider Second Chance Loans
As the name suggests, a second chance loan attempts to provide buyers with a loan when they’ve been turned down by a conventional loan.
Essentially, second chance loans are meant to give those with poor or damaged credit a second opportunity to obtain a loan.
If you choose the second chance loan route, be sure to do your homework first. Choosing the wrong company can be a headache for buyers and essentially create more financial problems.
When searching for a second chance lender, be sure that they are reputable and have a great track record of positive customer experiences.
If you’re wondering where to find a second chance loan, you can potentially get them through credit unions. You can even get them through large companies like New Roads Auto Loans who have additional financing options for those with less than perfect credit scores.
Keep in mind that second chance loans will almost always come with higher interest rates, which means you need to be prepared to pay.
Having poor or damaged credit certainly doesn’t prevent you from obtaining an auto loan. If you have less than perfect credit, it’s important to understand your options. If you need an auto loan, consider a cosigner, increase your down payment, or consider a second chance loan.