Buying a car is undoubtedly a huge undertaking, especially with regards to financing. Thankfully, those with a good credit score can easily access auto loans. Conversely, if you have a poor credit rating, then accessing an auto loan might not be as straightforward. It is therefore naive to underestimate the importance of a good credit rating when you want to get an auto loan or any type of financing for that matter. The difference is calculated in the rate of interest you are charged.
For starters, the single biggest factor that will determine your auto loan rate is your credit score. Therefore, it is crucial to know where you stand before you go for negotiations on your auto loan rate. Most, if not all, lenders use your credit score to measure your responsibility, reliability and history. The credit score is determined by factors such as on-time payment history, age of credit history, number of open lines, as well as any derogatory remarks.
Here is a rundown of the factors that affect your credit score:
* The most significant factor used to determine your credit score is whether you pay your bills on time and in full.
* Lenders are interested in looking at your balances to see the number of balances maxed out. Therefore, it is very important to keep your credit balances at approx. 25% or less of your credit limits.
* The next thing is to check for how long you have had available credit. The longer the credit history, the higher the credit rating will be.
* Watch the number of times you apply for credit cards or loans as that will also affect your credit rating. The higher the number of credit cards or loans, the lower your credit score. A high number of credit cards or loans is an indicator that you are struggling financially or that you have a huge amount of debt. And it does not matter if you have never used the credit cards before or actually received the loans.
* Finally, it is employment. If you are in a stable and steady job, your credit score could be higher – that is because a steady employment shows that you have the resources to meet your credit obligations.
Knowing all these is very important. Most people do not concern themselves with knowing their credit score or the factors that influence their auto loan rate. Knowledge is power; therefore, with this information in your fingertips, you’ll negotiate for the very best loan terms and interest rates.
Strategies for Securing Auto Loans with Bad Credit
While having a good credit rating enables you to easily access auto financing, having a poor credit rating does not disentitle you an auto loan, and on terms that do not break the bank. Companies like TI Financial specialize in bad credit car loans and programs are available for most credit situations. Just like everything else, bad is merely a matter of opinion and degree. Therefore, if the score is borderline, some lenders can see a good prospect while others, depending on their criteria, would see some risk.
Below are some of the strategies you can use to get good auto loan rates even if you have bad credit:
* Get pre-approved; this will enable you to shop around already knowing the terms of your financing. Therefore, you will only focus on negotiating for a good price for the car.
* Get a co-signer; you will improve your chances of getting approved for a loan if you apply with a creditworthy cosigner. A cosigner will enter into the credit loan contract and help to meet any missed payments or pay the loan in full should the borrower default.
* Being flexible in your choice of cars will go a long way. Remember that you do have bad credit, whether or not it is your fault or not does not make any difference. If you are going into a dealership expecting to get a good credit loan on a Lamborghini, think again. Go ahead and get that Kia Soul; remember what you need right now is transportation, and when you can improve you credit, you can always get something nicer down the road.