Your financial past sometimes has a way of interfering with your financial future.
This is definitely true when it comes to securing financing for big expenses like a car.
Depending on where you live, having a car can be necessary a need, not a want.
Can You Get a Car Loan With Bad Credit?
Fortunately, it is possible to get car loans with bad or poor credit.
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You may have to put down a higher down payment.
You may need to ask a trusted friend or relative to co-sign for your loan.
But getting a car loan with bad credit is doable.
What Role Does Your Credit Score Play in Getting an Auto Loan?
Some lenders even have a minimum credit score threshold in place for borrowers.
They also may look at your income, your employment stability, your debt-to-income ratio andyour payment history.
What Is Considered Bad Credit?
Check Your Credit Report
Dont wait for potential lenders to tell you what your credit score is.
Before applying for car loans, be sure you know whatll show up when lenders perform a credit check.
Theres also the possibility that theres an error in your credit reporting history that is bringing down your score.
you might dispute errors with your creditors and the three credit reporting bureaus Equifax, Experian and TransUnion.
Get a freecredit reportfrom each credit bureau atAnnualCreditReport.com.
Check Your Debt-to-Income Ratio
Having a low debt-to-income ratio is ideal for getting car loans.
Auto lenders typically look for adebt-to-income ratioless than 45%, though some set their cap at 50%.
Take that number and multiply it by 100 to get your debt-to-income ratio as a percentage.
If you dont already follow a monthly budget, nows the time tostart a budget.
Be aware, its not just loan payments it’s crucial that you budget for.
Youll need to pay for car insurance and gas and potentially parking and tolls on a regular basis.
Knowing how much you canafford for a monthly paymentwill help you choose the best vehicle and loan offer.
If you’re free to put down a larger down payment, its even better.
Research lenders with low credit score thresholds or who advertise offering bad credit auto loans.
You might check with your bank or credit union first, but also look into online lenders.
Compare each lenders interest rate, down payment requirements, loan terms and fees.
Youll both take on the responsibility of making the monthly car payments.
Aco-signeris someone who vouches for your ability to pay.
Making monthly car payments on time and reducing other debt are two ways toboost your credit score.
Make extra payments toward your debt when possible.
If you get a work bonus or unexpected money, put it toward your debt.
Picking up a side gig can help you pay down debt faster.
When you are comparing lenders, confirm to inquire about their minimum credit score requirement.
Also, plan to put down a sizable down payment.
Raising your credit score or using a co-signer will improve your chances of getting a more favorable car loan.
It can be very difficult to get approved for auto loans with a 300 credit score.
Most banks and credit unions dont offer loans to people with these credit scores.
Consider waiting to improve your credit score first or asking a trusted friend or relative to be a co-signer.
Nicole Dow is a senior writer at The Penny Hoarder.
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…