After home loans, car loans are the next most popular services that consumers want to obtain. Cars are used both for personal luxury and for practical purposes. Unfortunately, what if you have a bad credit score? Can you still be entitled to these auto loans?
Many banks boast of their services that include providing auto loans for individuals ( https://www.crediful.com/best-auto-loans/ ) that need them. However, not all advertisements are as is. When you apply for them, you’ve got to anticipate that your credit score will play a role in the fate of your application. If you are incapable of paying for a car through your own cash, you can still obtain one by undergoing through a loan application.
Car Loan: Things to Know
According to credit specialist Experian, out of all the loans asked when buying cars, those given to nonprime (those with 660 score and below) and subprime (those below 600) clients decreased in 2016 than in 2015. However, more than 40 percent of auto loans were transacted between consumers categorized as nonprime, subprime and deep subprime.
This only means that it’s not entirely impossible to get auto loans even with a low credit. Remember that having a bad credit rating does not mean institutions will never allow you to obtain loans. So here are some things you can take to improve your scores for car loans.
- Be Wary Of Your Credit Score
Yes, it may be true that these loan providers are usually the ones taking a look at your credit scores as a big part of the application. However, personally checking your credit scores from time to time will help you in more ways than you can think.
- For one, you are provided with your own personal point-of-view about where you are standing in terms of your credit.
- Treat this as knowing your body temperature and from then on, you’ll know how to diagnose certain things. As in the case of credit scores, you can at least have an idea if you’re on the right track towards financial stability or not.
- Get Hold Of Your Credit Report
Your credit score can be a way to get a lot of information about your financial standing. However, availing of car loans also means that you have to take a look at your credit reports.
- These reports further show your transaction history and loans that you have or have not paid on time.
- It will also present you with finances that have been categorized as collection, repossessions and bankruptcy.
- Devise A Strategy To Pay Off Current Debts
If you find yourself having several credit card bills yet to be paid amid your car loan application, you have to deal with them once and for all. The way to this feat is to create an effective game plan on how you can settle these.
- A smart way is to first repay the smaller amounts and those loans taken at higher interest rates.
- The game plan can include reminding yourself every pay day or a few days before this day, making a timeline, and detailing everything that you need to do.
- Prepare A Large Sum For Down Payment
Aside from your credit score, car loan providers and car dealers will often look at your down payment to gauge your capacity to pay the remaining balance. Increasing the percentage of money to place as down payment will help lenders change the way they view you even if you have bad credit.
- It may appear “hypocritical” for some since you are showing a face value only to get these loans approved, but this is helpful if you have the means to avail them.
- Lenders usually become less strict for those who can show that they can at least offer down payment at around 20-percent or more of the full amount. Less than this value may still get one away and have their loans approved easily, so never miss on this fact.
- Be Responsible On That Credit Card
Think of a car loan application as a major recital event where individuals usually prepare ten-fold. When you find yourself in the middle of this situation, it is an opportunity for you to become even more responsible with credit card use. Good credit card usage can also benefit your score in the long run, which can boost your chances of availing other loans as well.
- One important tip is not to cancel your current credit card accounts. Many people believe that to ease themselves away of the burden of credit during loan applications is to cancel some of these accounts. However, cancelling these may even hurt your scores more.
- Keep using these cards in some of your expenses but be sure to pay them as well. Along with this, you also have to use less than around 30-percent of your credit limit monthly. Keeping a low key about spending through your credit is one of the best measures you can take to get that car loan approved without hassles and issues.
Itchy about getting hold of those car keys? Understand the road to a good credit first before literally driving these wheels on the road. Getting yourself a new car can have its own perks, but getting a car loan isn’t a walk in a park. Understanding the factors above can greatly benefit you and your journey to get your own automobile.