Can You Apply for a Car Loan When You Have Bad Credit?
You need some “wheels” to get around, but paying cash for a new or used car isn’t an option. Financing a vehicle remains an option for most buyers, but something worries you. Your credit score is on the low side. Does this mean you are unable to apply for a car loan? No, even people with poor credit can explore options for borrowing.
Anyone can apply for a car loan. Applying refers to filling out an application and submitting the document. Send the form to the right borrower, though. Otherwise, you will find the request receives a rejection stamp. While no rules ban people from submitting a loan application, a bank or other financial institution is under no obligation to approve someone who is too risky. Credit history, income, and other factors tie into how the lender assesses risk. If you don’t meet the standards, the application won’t experience approval. While you do retain the option to apply elsewhere, each time you apply for credit, your score drops. So, it is not in your benefit to apply for too many loans. Find the right lender first.
Poor Credit Auto Lenders
The financing industry is home to many different lenders. Some lenders do specialize in delivering loans to persons with poor credit. Perform some basic research to locate what lenders in your area or online deal with risky borrowers. Sometimes, the auto dealership may be willing to finance the loan. “Zero down/poor credit” advertisements seek to stimulate business by targeting troubled borrowers. If you can’t find a loan elsewhere, “bad credit lenders” become viable options. Be mindful that the interest will be high.
Interest Rates on Bad Credit Loans
Risk plays a significant role in setting interest rates. A borrower with bad credit must expect to pay a higher interest rate. After all, the lender takes a considerable risk when approving the loan. Additional interest and fees help mitigate that risk. Borrowers, however, retain the option of shopping around for the best rates. Don’t rush into accepting any loan deal. Look for the best ones available through reputable lenders. This way, your loan doesn’t become too costly.
The Refinance Plan
In time, you may be able to refinance the loan. Refinancing refers to taking out a new loan to pay off an old one. If your credit improves, acquiring a new loan at a lower interest rate may become an option. With the new, less-expensive loan, you could eliminate those high rates.