Bad Credit? Get an Auto Loan

Bad credit may impact your life in many ways, but it doesn't mean you can't get a car. There's no line in the sand where credit suddenly becomes "good," because poor credit is quite subjective in today's lending world. One lender may consider anything below 550 as a bad credit score. Another lender might consider scores below 620 as an unworkable score. With a little research, anyone can qualify for a bad credit auto loan.

Take a Look at Your Credit Report

Don't automatically assume that your credit score will prevent you from getting a car loan. Obtain your credit reports from the three major credit reporting agencies, and get to know what's on your report.

Although you might not be able to create dramatic changes in your credit report immediately, at the very least you may be able to boost your score a few points by making sure there aren't any mistakes on your report. You might qualify for a better interest rate on an auto loan with a slightly improved score that brings you from 590 to 600.

Car Loans Aren't Mortgages

It's difficult and almost impossible to qualify for a mortgage if your credit rating is trashed, but lenders don't use the same measurements for car loans. A house is a hefty investment for a homeowner, and it's a rather significant risk for the bank.

An auto loan, on the other hand, doesn't represent a huge risk for the bank. If you don't make payments, they'll repossess your car without much effort. Foreclosing on a house, on the other hand, is a much more expensive and difficult process. If your credit score puts you far below what you'd need to qualify for a mortgage, don't worry. You're likely still eligible for a car loan, and you might even get a great interest rate if you've managed to make all your payments on time to other creditors for the past six months.

Apply Online for Assistance

Even if you have bad credit, you'll still find you're eligible for loans from a variety of lenders. Even though you might feel excited to be approved for a bad credit auto loan from any lender, make sure you check the interest rate and terms of the loan before you apply.

You may even be able to play one lender off another by sharing interest rates to see if you can get a lower rate on your auto loan from your preferred lender. In addition, you may want to look at the rates offered through lenders with whom you have prior experience. They may loan you money because you're a returning customer.

Maintain On-Time Payments

You may qualify for a larger car loan amount if you can make on-time payments to all of your creditors for at least six months. While you may not have the luxury of waiting to buy a vehicle, it may help your chances for auto loan approval if you can show your lender that you've become a responsible borrower.

If you are successful in getting approved for a bad credit auto loan, do your credit a favor and make on-time payments on your loan. Once you pay that loan off and improve your credit score, you'll set yourself up for further successes when you apply for larger loans like a mortgage or a loan for a more expensive vehicle.

Take your time in choosing a lender and applying for a car loan. You'll find better rates and a higher likelihood of loan approval if you do your research on lenders and rates before sending in your application.