Having bad credit makes it difficult to find loans, and auto loans are no exception. When you apply for an auto loan, the lender will more than likely check your credit score. And you probably know what comes next. The lender won't like what they see when they look at your credit score. In fact, some lenders may not even approve you for an auto loan. If you do get approved, you will be given a bad credit auto loan, which means you will have to pay extremely high interest rates.
Unfortunately, there really isn't any way to get around paying high interest rates on bad credit auto loans. If you have bad credit, you will have to accept that you will pay more for an auto loan than people with good credit. But that doesn't mean that you should accept just any loan. Even though you are doomed - well, probably doomed - to pay a high interest rate, you should still shop around. If you don't you may get scammed into paying a much higher interest rate than you should.
To get the lowest interest rate and fees possible on a bad credit auto loan you should:
Check Your Credit Score. Knowing your credit score will prepare you for how high of an interest rate you can expect to be charged on a bad credit auto loan. Luckily the Fair Credit Reporting Act makes it easy for you to get your credit report. The act states that you can receive a free copy of your credit report once every 12 months from the three companies that provide your credit score - Equifax, Experian and TransUnion ("Your Access to Free Credit Reports"). You can request your free credit report from www. annualcreditreport.com, which is the only Web site that is authorized to provide free credit reports ("Your Access to Free Credit Reports").
Find the Current Bad Credit Auto Loan Interest Rates. There are many places where you can find the current interest rates on bad credit auto loans, such as www.myfico.com. At myFico, you will find the current auto loan interest rates for each category of credit scores. Knowing the average interest rate for your credit score will enable you to talk intelligently with your lender. It will be easy for you to tell if your lender is trying to charge you too much for your auto loan.
Shop Around. Just like anything else, you must shop around to get the best deal. Look at many different lenders' loan terms before signing a bad credit auto loan. Each lender will offer you different interest rates and fees. To learn how to tell which lender is offering the best deal, read our article
Improve Your Credit Score. After choosing a bad credit auto loan, it is time to improve your credit. Getting a better credit score will keep you from having to pay high interest rates in the future. People with good credit are offered much better loan terms and pay much less for loans than those with bad credit. In addition, if you improve your credit score, you may find it beneficial to refinance your bad credit auto loan. Refinancing your auto loan will give you a lower interest rate, which means you will owe less money. After a year of working hard to improve your credit score, order your free credit report again. See if your credit score has improved. If it has, start looking into refinancing your bad credit auto loan.
