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Bad Credit Auto Loan: Your Best Options?

A bad credit auto loan isn’t impossible to find, it just takes a little work! If your credit is a bit damaged, you don’t have to exclude it from a car loan. There are companies that will overlook bad credit. Auto loan options for you if you have less than perfect credit include dealer financing on the lot, getting a co-signer, trying to repair your credit before looking for a bad credit car loan, and agreeing to less than ideal terms for a car. with bad credit. loan.

Your best starting point, even before you start shopping for a car, is to check your credit report yourself. A new law passed last year entitles you to get one free credit report from each of the major credit reporting agencies every 12 months. The law is being rolled out across the country in stages, but by the end of 2005, regardless of what state you live in, you will have the right to check your own credit history for free once a year to find out if you have bad credit. Auto loan and finance companies will use information from your credit history to determine whether or not to grant you a loan and on what terms, so it makes sense to check first and avoid being surprised.

If you find errors on your credit report, or if a credit reporting agency mistakenly reports that you have bad credit, postpone applying for an auto loan until you have a chance to clear up the error. If, on the other hand, your credit report legitimately lists problems, you can start looking for a bad credit car loan through one of several different sources.

Because a bad credit auto loan carries more risk for the lender, it is difficult to find one with “competitive” interest rates. The best way to get a good interest rate and start repairing your bad credit is with a co-signed auto loan. As a co-signer on an auto loan, your co-signer assumes responsibility for repaying your loan if you do not make the payments. The interest rate is likely to be much better than what you can get with any other bad credit auto loan, very close to the terms that your cosigner would be offered. Just be sure to ask the lender to report payment history to you and your co-signer so that you can begin repairing or building your credit history.

If a co-signer is not possible, or if you prefer a loan in your own name, try obtaining a bad credit auto loan on your own before going to the dealership. Your regular bank is your logical first choice. Make an appointment to speak with a loan officer at the bank where you normally do business, as they have an interest in continuing and expanding their relationship with you. One possible option through a credit union, for example, is to arrange for a bad credit car loan that is tied to one of your other accounts as collateral.

The car dealership should be your last option for a bad credit car loan. They have a keen interest in getting you into a car, but keep in mind that you will pay premium prices to finance a bad credit auto loan through a dealership. However, if it’s your only option, you may be able to convert your high-interest auto loan in the future if you can repair and improve your credit score.

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