Got bad credit but need a car loan? Check out these simple tips to improve your chances – from fixing your credit report to saving up for a bigger deposit.
We all dream of having our own car – blasting our favourite music, the extra space, and the freedom from public transport. But sometimes life throws us curveballs, leading to a bad credit score, which can make getting a car loan tough. Don’t worry though! There are ways to improve your chances. Here are some tips to help you get a car loan even with a less-than-perfect credit score.
Before you hit the dealerships or start looking at online listings, it's important to have a clear understanding of your credit score
Get a copy of your credit report from major credit bureaus like Experian or TransUnion. This will show you where you stand and let you check for any mistakes that might lower your score. Fixing these errors can boost your credit before applying for a loan.
Be prepared to pay higher interest rates
If you have bad credit, you’ll probably face higher interest rates on car loans. Lenders see borrowers with bad credit as high-risk and charge more to protect against this risk. While this might not be great news, knowing what to expect can help you plan your finances better.
Try to save up for a bigger deposit
Saving for a bigger deposit can improve your chances of getting approved for a loan and might even get you better loan terms. A larger down payment reduces the loan amount and lowers the risk for the lender. This could also mean lower interest rates for you.
Make sure you apply to a bunch of different lenders
Don't limit your search to just one type of lender. Look at the different, but reputable lenders, to see what terms they might offer you for a car loan.
Think about asking someone to co-sign your car loan
Having a co-signer with good credit can make a big difference. A co-signer guarantees the loan with their credit and agrees to take over payments if you can’t. This increases your chances of approval, but make sure your co-signer fully understands the responsibilities and risks involved.
Pick the car you want to buy carefully
When shopping for a car with bad credit, practicality should trump luxury. Opt for a reliable, budget-friendly vehicle that meets your needs without straining your finances. A less expensive car requires a smaller loan, which is easier to manage and repay. This not only makes financial sense but also helps you rebuild your credit over time as you make timely payments.
Do all you can to rebuild your credit again
While you’re working on getting a car loan, embark on steps to rebuild your credit. Manage your current debts responsibly, make consistent on-time payments, and keep your credit card balances low. Improving your credit score opens up better opportunities for future borrowing and shows that you are financially stable.
Be patient
Getting a car loan with bad credit is a process, not a race. Be patient and persistent in improving your credit, researching your options, and managing your finances. With time and effort, you'll get the loan you need.
Got your car loan sorted? Now it's time to protect your new ride! You can get an instant car insurance quote in 90 seconds on our website or app – no long phone calls or hassle.
