When it comes to auto loans, people with good or excellent credit (credit scores above 700) don’t know how good they have it. For these borrowers, auto loans are easy to come by. And, not only that, but these lucky folks are offered at the lender’s primo interest rates: the lowest the lender is able to offer to anybody. Yes, for such a borrower, one can feel like a V.I.P. when they walk into the lending office.
But, what about the rest of us? Those with fair or poor credit scores do not have such a nice time when attempting to finance a car. If a bad credit person even gets approved at all, they count themselves lucky – and then smile while paying ridiculous interest rates.
Fortunately, there are banks that offer auto loans for poor credit individuals. These auto lenders can be a godsend for bad credit individuals who need a car. Here are 5 tips for getting approved for the best-possible interest rate from these banks:
1. Most banks avoid credit-challenged individuals like the plague:
There is a good reason why most banks do not like to lend to bad credit individuals. And, it may not be for the reason that you think. Sure, banks feel they are at greater risk for a loan default when they lend to people with poor credit scores. But, that is not the real reason why they prefer not to loan to them. The real reason is: looking at factors beyond the credit score is more work for them.
You see, banks know that there are plenty of credit-worthy people out there who have low credit scores. But, taking the time to identify other factors that makes them worthy of an auto loan would just be too time-consuming. They would rather simplify everything down to a single 3-digit credit (FICO) score. And, who can blame them?
2. Some banks actually seek out bad credit individuals to lend to:
The good news is that there are a handful of banks out there who actually look to lend to people with low credit scores. These banks are willing to take a bit more time to really understand each individual borrower to determine whether they are worthy of lending to. In short: they look beyond the credit score.
3. Start with a list of multiple bad credit lenders and make them fight over you:
To get hooked up with one of these banks, start by searching for and making a list of multiple bad credit lenders. You are going to want to “force” them to compete for your business, so make sure that your list includes at least 3-4 lenders.
4. Know your credit score:
Spend a few minutes to find out your credit score with one, if not all three, of the major credit bureaus. Even if you already know you have a bad credit score, you will be more empowered in negotiations if you know exactly where you stand.
5. Before applying, choose a reasonably-priced car:
One final tip: before applying for loans with these lenders, make sure to choose a car that is within your means. It is true that some bad credit lenders will lend almost any amount of money to the right borrower, but the fact is that you will increase your chances of loan approval by choosing a reasonably-priced car.