When Worse Comes to Worst: Auto Loans for Very Bad Credit

The results are in and sadly, you’ve been getting denied, denied, denied on your auto loan applications. When you ask the loan officer, he tells you that it’s primarily because of your credit. You are told that those firms, dealerships or private lenders only cater to prime borrowers and that with your credit score; you fall under the subprime category.

Subprime? You’re not sure what it is but it sure sounds condescending to you. This type of credit is what a lot of lenders want to guard themselves against. You don’t come off as very credit worthy to them.

Assessing the Situation

With tough times, lenders would want to be wise with business. You see, there’s bad credit and really bad credit. A few late payments on your card is one thing, getting behind on paying as it piles up and butchers your credit score is another. This label speaks of your paying habits.

However, this doesn’t spell out “DO NOT LEND TO ME” to all dealers or lenders, it would just close a few doors for you and you’d have to search well for one that accepts your credit situation with terms that suit your needs. Don’t think it’s impossible. Though it is true that tough times are abound and people want to make wise choices, to get business, companies would be willing to take some risks.

There are still quite a number of lenders who would specialize with your type of credit and would be willing to take the risks other firms or dealers wouldn’t take. And if this sounds too good to be true, it’s because there’s a catch. With the potential risk you have according to your records comes a much higher interest rate and money down than average. Now that you understand the situation you’re in, you should know a few things to get you as reasonable a deal as you can get.

Action Plan

The first piece of information you should get is your credit report. Your credit behavior is what got you here, so you better know the state it’s in and take a look at how you’ve been paying. Make sure everything on it is accurate. Who knows? It may not be as bad as you think.

Another thing to keep in mind is that a dealer shouldn’t be your saving grace or guiding light at this scenario. These dealers always have a cut on the deals they close. This is why most of the time, if not always, going through a dealer instead of getting a loan on your own would be much more costly.

Taking that point in mind, you’re quite free to look around for different offers. Terms and rates would vary from lender to lender so you better think of how their offers stack up against each other. Though it may seem exhausting, this shouldn’t be something you’d even think of skipping. Don’t jump on the first application you’re approved of just because you’re tired of getting denied. Make sure you understand the terms and that when you agree on them, make sure you’d be able to follow them and pay the loan off.

Your credit is up to you. It doesn’t stay bad if you take necessary actions to fix it. You are very much capable of improving it if you’d only make your payments on time and don’t overextend yourself. With discipline, you can very well get out of the subprime hole and get better and better with your credit. When it does get better, and if your lender’s terms allow it, go for refinancing and lessen your burden. Know that you can make you situation much, much better.