Auto Loans with Bad Credit
by Steve Wilson

Purchasing a new car can be a fun and exhilarating time. However, for those with less than perfect credit purchasing a new car can be stressful and exhausting as they try to locate auto financing for their new vehicle. Many people experience difficult times at one point or another in their lives, and in many cases their credit rating suffers. When you have bad credit, many lenders see you as a high risk and are reluctant to lend you money to make your purchase. If you find a lender that is willing to provide financing you should expect to pay a higher interest rate than someone who has a better credit rating. If you do have bad credit and are looking to make a new car purchase there are several things you can do to make obtaining an auto loan a little easier.

Before applying for any type of auto financing you should obtain a copy of your credit report and credit score. It is important to know what potential lenders will see before you start looking for a loan. It is recommended that you obtain a copy of your credit report at least once per year, before making a major purchase or if you have been turned down for credit. Obtaining a copy of your credit report will not lower your credit score and will list all of your outstanding credit card and loan debts, as well as any collections you have. You can obtain a copy of your report by contacting the credit reporting agencies directly

•Equifax: (800) 685-1111, www.equifax.com
•Experian (formerly TRW): (888) 397-3742, www.experian.com
•TransUnion: (800) 888-4213, www.transunion.com

Carefully review your report to ensure that everything is accurate and take immediate steps to correct any inaccurate or wrong information. Each negative item on your credit report goes to lower your credit score. Your credit score will determine whether or not a lender will be able to lend you money, and if so at what interest rate. Traditionally the lower your credit score, the higher the interest rate you can expect to pay.

If you are not planning to make your vehicle purchase immediately, and your credit is less than perfect, you may want to look into ways to improve your credit before you apply for your auto loan. There are a number of excellent online resources such as MyFICO.com www.myfico.com that will not only sell you a copy of your credit report and score, but also provide calculators that will help you determine the affect of certain actions such as paying off $1000 on your credit card, or how consolidating your debt will affect your credit,. If you have any accounts that are in collections, paying those off can quickly help you improve your credit score.

Lenders want to lend you money, but they also want to know you are going to pay it back. Paying off a few debts and paying all of your other bills on time puts out a positive message to lenders, letting them know that your troubles are behind you and you are making an effort to pay your debts. Even increasing your credit score by a few points can open the door to more loan possibilities, and lower interest rates.

If your vehicle purchase needs to happen immediately, then speak to your bank or credit union to see what types of credit scores they typically accept. When you apply for a loan and are denied you can negatively impact your credit score, and your ability to get other loans so it's important to only apply for loans that you have a good potential for being approved for.

There are several excellent websites and lenders on the Internet that have loans designed particularly for individuals with less than perfect credit. Most can be found by performing a simple Internet search for the term “auto loans”. In most cases these sites allow you to complete your loan application online, and send your application to several different lenders who will compete against each other to offer you the best auto loan rate. Websites like Auto Loans America.com www.autoloansamerica.com may be a good solution because with one application you are essentially applying for several loans, and because the lenders are competing you are likely to get the best rate possible for your current credit rating.

While in the end you may pay a higher interest rate on your auto loan, getting auto financing for a new vehicle isn’t impossible with less than perfect credit. Do some research before you apply, and you’re bound to find the right lender to make your vehicle dreams come true.