Auto Loan Tips For Subprime Borrowers
Few people have the financial resources available to pay cash for a new vehicle, so having access to an auto loan can be beneficial. Unfortunately, obtaining an auto loan can be challenging if you are considered a subprime borrower (meaning you have a poor credit rating).
Here are three tips that you can use to help you successfully shop for an auto loan if your credit is less than perfect.
1. Know your credit score.
Understanding the state of your credit is essential when it comes to securing an auto loan. Before you can begin locating a lender that will be able to supply you with the funds you need to complete your vehicle purchase, you need to know your credit score.
This number tells a lender a lot about your risk level as a borrower. By knowing your score before you try to apply for a loan, you can work only with lenders that you know are willing to accommodate your credit situation.
2. Clean up your credit in advance.
Improving your credit before you try to secure an auto loan could help you qualify for the funds you need at a lower interest rate. Paying a lower interest rate will save you a lot of money over the life of your loan, so if you have time to correct any errors that may be showing on your credit reports prior to applying for an auto loan, you should make cleaning up your credit a priority.
You can dispute inaccuracies with the credit bureaus directly by filing a claim online, or you can talk to creditors that are reporting inaccurate information and request that they contact the credit bureaus directly to resolve these errors. Cleaning up mistakes on your credit report will help you improve your credit, making it easier to find an auto loan lender willing to work with you.
3. Be prepared with a substantial down payment.
While consumers with excellent credit might be able to finance the entire purchase price of a new vehicle, subprime lenders will typically require a down payment before they extend auto loans to their borrowers.
You should play to have a substantial down payment saved before applying for an auto loan. It can be beneficial to contact several subprime lenders in your area and ask about down payment rates to get an idea of how much money you will need to set aside for your own down payment as you begin saving for your auto purchase.
Subprime credit can make obtaining an auto loan challenging, but knowing your credit score, cleaning up mistakes on your credit reports, and saving for a down payment will help you successfully secure the auto loan you need. Contact a company like New Horizons Credit Union for more info.