The 7 Top Auto Loan Companies for Bad Credit Revealed

Young man driving in the modern car.

Having bad credit has a way of preventing you from getting the things you need. But it does not stop you from needing those things. Two major ways bad credit can get in the way is when you need to buy a car or want to buy a house. Fortunately, there are auto loan companies available that help those with bad credit.

Auto Loan Companies for Bad Credit

We took a look at what is available and compiled this list of seven of the best auto loans for bad credit online. This is by no means an exhaustive list, so if none of these suit your needs, do some more research. These are, however, seven great auto loan companies to start your search with and find a car loan with bad credit.

#1 Capital One

Capital One is one of the auto loan companies that lets you pre-qualify for a loan. This means that you can see if- according to the information you provide- they will approve you for a loan without a hard hit to your credit.

If you choose to use Capital One, they will need to do a full credit check. But they do not require it at the beginning of the process. Your pre-qualification is valid for a full 30 days. Pre-qualifying does not guarantee a loan or the quoted interest rate. All of the terms and rates will be decided upon the final approval of the loan.

  • Minimum Required Credit Score: 500
  • Minimum Income: $1,500 - $1,800
  • Minimum Loan Amount: $4,000
  • Interest Range: 3.59% and up

There are some restrictions to keep in mind:

  • Capital One does not provide loans in Alaska or Hawaii. So if you live in either one, you will need to look for alternative financing.
  • The car you purchase must not be older than 12 years. Though, in some states, 10 years is the maximum. They also do not want the car to have more than 120,000 miles- the fewer, the better.
  • Some makes and models do not qualify. If you already have a car in mind, make sure that Capital One financing will cover that particular one before you get too deep in the process.

#2 Rate Genius

Rate Genius is another auto loan broker that helps those with low credit. People with scores of as low as 550 can be approved if they meet the other requirements. However, you can expect a pretty high-interest rate for a low credit score.

There is a pretty fast preapproval time, sometimes in as little as two hours. But there is a hard credit inquiry. Rate Genius will send your application to up to three lenders if you are denied by the first option. The car you choose cannot be older than seven years or have more than 100,000 miles on it.

As it is an auto loan broker, it does not specify any vehicle restrictions, though the lenders it works with may have their own. Rate Genius financing is available everywhere in the U.S.

  • Minimum Required Credit Score: 550
  • Minimum Income: $2,000
  • Minimum Loan Amount: $10,000
  • Interest Range: 3.49% - 25.87%

#3 My Auto Loan

My Auto Loan is a broker who works with several auto loan companies to provide its applicant with several loan options. The company works with applicants who have credit scores as low as 500, but you must make at least $1,800 per month. You can expect a hard credit inquiry.

My Auto Loan only approves cars that are less than 10 years old and have less than 125,000 miles. Additional vehicle restrictions may come through different lenders. My Auto Loan is available in all states except for Alaska and Hawaii.

  • Minimum Required Credit Score: 500
  • Minimum Income: $1,800
  • Minimum Loan Amount: $8,000
  • Interest Range: 2.74% - 27%

#4 LendingClub

LendingClub is one of the auto loan companies that provide both peer-to-peer lending and direct lending, increasing your available options. It allows you to view and compare two loans at a time without a hard credit pull. Though, it does require a hard inquiry if you officially apply.

While they only require a credit score of 510 to qualify, you can expect your interest to be high if you have bad credit. Also, for those with scores less than 630, you might find yourself needing to meet additional requirements.

  • Minimum Required Credit Score: 510
  • Minimum Income: No minimum
  • Minimum Loan Amount: $5,000
  • Interest Range: 3.99% - 24.99%

LendingClub is only available in 35 states. So double-check that yours is one of them prior to applying. Additionally, the car cannot be older than 9 years or have more than 110,000 miles if your credit score is under 630. Those numbers increase to 10 years and 120,000 miles if your score is higher.

One of the biggest benefits of using LendingClub is that you can extend your loan term by refinancing with them. This is extremely helpful for those who find it difficult to make their current payments. You can often get it extended up to 12 months. However, your current loan has to have been opened for a minimum of 30 days. And you must have at least 24 months left on your current loan term.

#5 Springboard Auto

Springboard Auto is one of the direct auto loan companies that work with bad credit. You only need a credit score of 500. But they do require that you have a minimum monthly income of $2,000, which is the highest on this list.

They also require you to get at least a $7,500 loan. You must have at least four accounts on your credit history. And you can expect origination fees of almost $600.

  • Minimum Required Credit Score: 500
  • Minimum Income: $2,000
  • Minimum Loan Amount: $7,500
  • Interest Range: 5.00% and up

The car can be no older than 10 years and have no more than 138,000 miles on it. Additionally, there is no financing available for electric cars, some trucks, and a few other types. Financing through Springboard Auto is only available in 33 states. While the requirements are a little more stringent for this lender, it is a great option for those who have bad credit yet still have a decent income.

#6 OpenRoad Lending

OpenRoad Lending is a loan broker that works with traditional financial institutions and other auto loan companies to find their applicants the best possible loan. While OpenRoad Lending itself does not do a hard credit pull prior to an official application, some of the lenders in its network might.

It is open to all borrowers with a credit score higher than 500. But it is important to remember that the lower the credit score, the higher the interest rate.

The minimum loan they approve is $10,000, which is a bit steep for some people. However, most used cars come close to $10,000 at a minimum. So whether this loan amount is good or bad really depends on the total of your car.

  • Minimum Required Credit Score: 500
  • Minimum Income: $1,500
  • Minimum Loan Amount: $10,000
  • Interest Range: 2.90% - 24.90%

It only approves cars that are less than 10 years old with no more than 140,000 miles. But some makes and models are not approved regardless of age and mileage. These include smart cars, Oldsmobile, and a few others. So be sure to check if your car is on that list. OpenRoad Lending is only available in 40 states, so be sure to check for your state as well.

#7 Carvana

Carvana is a bit different from most other auto loan companies as it only finances cars that it sells. This can be beneficial in some ways, but it also limits you to those cars. If you have already found the car you want or Carvana does not offer what you are looking for, you will need to find another lender.

On the upside, it simplifies the process a bit. You can do your car shopping and your finance applications all in one place, saving you hours or days of time. Even better, there is no need to negotiate the price.

  • Minimum Required Credit Score: None
  • Minimum Income: $10,000 per year
  • Minimum Loan Amount: $4,000
  • Interest Range: 3.90%

There is no minimum credit score required. Though the APR will depend on your credit. Carvana will do a soft credit check so you can check rates and terms before officially applying. You must make at least $10,000 each year to qualify or currently be in bankruptcy.

You might be concerned about purchasing a car online, which is understandable. But there are some things that might ease your mind. First of all, the car goes through an extensive 150 point inspection and even includes a CarFax report. So you can view the history of it as well as a 100-day warranty. Second, they actually deliver the vehicle to you, in most cases free of charge, or reimburse your airfare if you fly to get the car.

Also, Carvana has a return policy. You have seven days after receiving the vehicle to test it out and decide if it is right for you. If it is not, Carvana will refund any money you put down on the car and cancel out the loan before a payment is even due.

What to Know Before You Apply

Before we jump into the loans and companies, let’s talk a little about what to expect in the process. Auto loan companies vary in many ways, but there are some general things to know before filling out any applications.

Credit Hit

Here is something important for you to know: When you apply for credit, your credit score takes a hit. You can get preapprovals from many auto loan companies, though. These are soft hits, meaning they do not really impact your credit score.

Play it smart- get as many preapprovals as you can before officially applying. Once you have some companies that have preapproved you, put in all of the official applications within two weeks. These steps will help minimize the impact on your credit.

Income

Most auto loan companies require a somewhat stable income. While not all lenders specify, a good rule to go by is to be sure you have worked for the same company for at least six months. Many want to see an ongoing income for the past three years.

Each lender will have its own requirements concerning the minimum amount of income you need. With bad credit auto financing, you usually need at least $1,500 of monthly income. Some lenders require more. In short, the better your income and the length of time you have had it, the better chance you have with financing.

Loan Amount

Some auto loan companies have minimum loan amounts that you must apply for. Be sure that you know what these are before signing a contract. You do not want to borrow more than you need or can afford.

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Interest Rates

It is simply a fact that if you have bad credit and get approved for a loan, your interest rate is going to be higher than that of someone who has good credit. This is because those with bad credit are considered risky, and a higher interest rate is intended to offset that risk.

Unfortunately, those interest rates can get pretty high- some up to almost 30 percent. That is $300 in interest for every $1,000 you borrow.

If your credit is really low, you should try to hold off a little while on getting an auto loan. I understand that desperate times call for desperate measures, so if you can’t hold off, I get it.

If you do no absolutely have to have that car right now, try to wait until you improve your credit some. The best way to improve your credit is to pay off what is on it. You may not be able to pay it all off right now, but try to pay off a couple of things- even getting just one thing off can improve that score.

Call your creditor and see if they will settle for a lower amount. They will often agree to this, meaning that you can pay that debt off more quickly. If you can do this before applying for a loan, you have a chance to get a lower interest rate.

Steps to Take Before Applying

There are some steps to take before you apply for an auto loan with any auto loan companies to increase your chances of success and speed the process up a little.

You should always know your credit score before you apply for any credit. If you know your credit score, you can check what score auto loan companies require and choose the ones your score meets, which saves you some time. It also lets you know if you need to work on your credit any prior to putting in applications.

No one needs a bill they cannot pay, but that is especially bad if you already have bad credit.

Prevent that by determining how much for the car you can afford first. Take a look at your current budget. How much can you afford to pay out each month? You need a specific amount in mind so that it can help you choose the best auto loan.

Occasionally, you will find auto loan companies that do not require you to have a down payment, but it is always best to. The more you have to put down on a car, the less you have to borrow. The less you borrow, the better all around.

Additionally, when you have more to put down, you have a better chance of approval with a good interest rate and terms. Try to put up at least $1,000 for a down payment, but if you can save more, you will be better off.

Even if you apply online, you will have to sign certain documents and turn in some paperwork. Try to find out what exactly the lender asks for and have it all ready when you apply. If you can, have it all already scanned into or downloaded onto your computer so that you can send it to the lender more quickly.

Conclusion

While bad credit can interfere with your ability to get what you need, it does not necessarily have to put a halt to your plans. As you can see, there are auto loan companies willing to work with those who have credit problems. Explore all options, don’t hurry, and I am sure you will find the best place to shop for a car loan. Don’t let a low credit score get in the way of you getting the car you need.

Subprime Auto Loan Options to Get You on the Road

Subprime auto loans are types of loans that are used to finance a car that is purchased. They are offered to people with a limited credit history or a low credit score. These loans usually have a higher interest rate when compared to prime loan options. And they can come with a prepayment penalty if the borrower chooses to pay off the loan early. However, these borrowers may have no other option for purchasing a vehicle. So they are often willing to pay the higher rates and fees associated with subprime auto loans.

The History of Subprime Auto Loans

Subprime auto loans became a big business in the auto finance industry after the monetary expansion of 2001 to 2004, along with subprime mortgages and other lending options for higher risk individuals. Financial institutions were flush with money so they sought out higher returns by charging higher interest rates to subprime borrowers. The term subprime was then used in the media later, during the mortgage crisis of 2007 and 2009. Subprime lenders began to thin out after the Great Recession but have since been making a comeback.

With the risks lenders face with subprime loans, you may be wondering why they even bother. The answer is that there is a lot of profit, especially in the auto industry. By having a blend of loans that have different credit risk profiles, auto lenders can manage the total risk and this maximizes the profit potential.

How Do Subprime Auto Loans Work?

There is no official cut off for a subprime loan. Usually, your credit rating would have to be below 650 and above 450 in order to be considered subprime. In general, there are fewer than 20% of Americans who fall below 600. In evaluating borrowers, lenders can ask to see W-2s, 1099s, and pay stubs to be able to prove income. If a borrower is in a line of work that is hard to prove income, such as being a restaurant server who receives a lot of cash tips, then he or she may need to bring in bank statements that indicate a history of consistent deposits in their account.

Some lenders do accept bank statements in place of standard pay stubs. Even when getting subprime auto loans, it’s still best to shop around for rates. Not all lenders will be using the same criteria for approval and some charge different fees than others. Interest rates can be quite high because the lender wants to ensure it can recoup the cost should a borrower default on payments. Borrowers may decide they want to improve their credit score to qualify for better loan terms.

Determining If You Have a Subprime Credit Score

Understanding your credit score can make a big difference when paying for bad credit auto loans. In order to interpret your credit score and what it tells you about your borrowing power for loans, you need to know where your score falls on the range between the lowest and highest number generated by the scoring system. All credit scores have the same goal, which is to help lenders understand how risky it may be to do business with you. A high credit score will mean that you are less risky and have a low likelihood of default. A lower score means more risk to a lender.

The average FICO credit score for Americans is 701. If you have a score of 800-850, that is considered exceptional. If you have a score of 740-799, that is considered very good. But if your score ranges from 670 to 739, that is considered good. A score between 580 and 669 is fair. A score that is below 579 is considered very poor. Scores in the fair range are likely to be considered subprime borrowers. Those with poor credit scores may not qualify at all, even for subprime auto loans.

Types of Credit Scores Matter

You may be surprised to learn that there are different types of credit scores. The scores are calculated using computer models and look at the contents of your credit report. The three national credit bureaus are Equifax, TransUnion, and Experian. Models developed by different companies, such as the FICO score, differ in how they calculate and report the scores. There are usually multiple versions of a given model available from the developer of the software used to score. When you are comparing one credit score to another, or looking to track changes over time, it’s important that you know which scoring model is being used to calculate the score, which credit bureau furnished the credit report, and the highest and lowest scores you get using the model.

When looking at your credit, you need to look at the credit score range. For example, the good credit range spans quite a bit and wouldn’t make you eligible for a variety of loan offers. The FICO score is used in about 90% of the lending decisions so it’s a good reflection of creditworthiness to a lender.

Calculating Your Credit Score

The specific calculation method that is used to calculate a FICO score is a trade secret but there are some things that factor into how your score is calculated.

Payment History: Paying bills and your debt on time is the biggest factor that affects your score and can account for 35% of the score.

Credit Usage Rate: You shouldn’t be using more than 30% of your total credit card limit if you want to keep your score higher. The credit utilization rate is responsible for about 30% of the score.

Length of Credit History: Your score will continue to increase over time, as long as you are following basic guidelines. New credit users aren’t able to speed up the length of the credit history but can help build up the score as the credit history continues to get older.

Total Credit and Debt: The credit score reflects total outstanding debt, as well as the types of credit you use. The FICO score likes it if you have a variety of different loan types, including installment credit and revolving credit.

Recent Applications: If you recently have applied for a loan then it will trigger a process called a hard inquiry. This means the lender has requested your credit score. A hard inquiry will usually lower your score by a few points, but as long as you continue to pay bills on time, the score will rebound quickly. If the lender uses a soft inquiry, or you are checking your own score, then it doesn’t have an impact.

Why Are Subprime Auto Loans Popular?

The standards for subprime loans have gotten more relaxed that they are being given out more often. There are a few reasons for that.

Collateral

A car loan is secured by the vehicle, which can be repossessed if you default on the loan. This means that some lenders are more willing to take the risk of giving loans. New technology makes it possible for the lender to disable the car remotely if you miss a payment.

Secondary Debt Sales

The growing market for subprime auto loans that are bundled into asset-backed securities have also prompted some lenders to make financing available to those who wouldn’t have qualified just a year earlier due to a history of not managing obligations.

Dodd-Frank Exclusion

The Dodd-Frank Financial Reform law from 2010 exempted automobile dealers from the oversight of the U.S. Consumer Financial Protection Bureau. This means that financing that is arranged through a car dealer is less regulated from loans that are obtained from a credit union or bank directly. It’s easier for lenders that are working through a dealer to take advantage of borrower’s bad credit.

Getting Subprime Auto Loans

If you have a credit score that puts you in the subprime category, you should still shop around for a loan. Banks, credit unions, and online lenders will specialize in borrowers with poor credit. Auto loans for bad credit online may be easier to get.

Figure Out What Kind of Car You Can Afford

See what kind of monthly payment you are going to be able to fit into your budget before you apply for a loan. If you aren’t able to finance the car you want within your budget then consider looking at more affordable or older models. Sticking to your budget is very important.

Work with a Lender You Know

If you have a credit union or bank where you already have an account, you may be more likely to get a better auto loan from that institution.

Know Your Credit Score

Your credit score carries a huge weight and is the main factor that puts you in subprime borrower status. Knowing your score will help you know where you stand and what your options are.

Consider More than Just the Monthly Payment

You need to weigh the total cost of financing the car. If you lengthen your term then you will pay more in interest over the life of the loan.

Look at All the Expenses of Car Ownership

This will include title fees, insurance, maintenance, repairs, and state taxes.

Shop Around

Just like with other loans, you need to shop around for subprime auto loans. Shop around and compare offers so you can make sure that you are getting the best possible loan terms for your situation. You can do that here, on Loanry. Remember, all lenders we work with are reputable companies who can be trusted when it comes to loans and honesty about terms and the agreement.

Benefits of Subprime Auto Loans

While there are plenty of disadvantages of subprime auto loans and you need to proceed with caution, there are some advantages as well.

Helps You Get a Vehicle: Depending on where you live, you may not have an option to use public transportation and need a car to get to and from work. Subprime auto loans can get you in a vehicle without having to spend the time working on improving your credit score.

Can Help with Credit: A subprime loan can help you improve your credit if you make your payments on time.

Can Help First Time Buyers: If you are a first time car buyer then a loan may be your only option for buying a car. You may not even have a credit score at all if you are just looking to buy a car for the first time.

Disadvantages of Subprime Auto Loans

There are some hidden risks with subprime auto loans. Before you sign a loan agreement, consider the potential cost.

High Interest Rates: A subprime auto loan usually comes with a higher APR than a conventional auto loan. The APR is the interest rate of the loan expressed as a yearly rate. The APR for an auto loan can also include fees, such as one for the origination of the loan. This number will give you a sense of how much the loan will actually cost. The interest rates on a subprime auto loan can be up to 29%. Those with employment situations that require access to a car can often be vulnerable in these situations and won’t have much of the power to negotiate the loan’s rates and terms.

Extra Fees: In addition to the higher APR, there may be higher fees attached to the loan. Some of these high fees can include a processing or origination fee, a prepayment penalty, and a service contract for repairs and maintenance service.

Risk of Repossession and Default: Subprime auto loans are at a higher risk for repossession and default. If the borrower takes out a loan with a harder-to-manage payment plan, it’s likely he or she will default and then the car is going to be repossessed.

Income Demands: Although subprime loan lenders may not be demanding about your credit score, they can be stricter when it comes to your income. You must have sufficient cash flow and income in order to cover the monthly payments. The lender will go through a thorough financial check in order to make sure that you can meet the payments. If you aren’t able to prove that you have enough cash flow, you likely won’t qualify.

Is a Subprime Auto Loan Right For You?

If you need to work on your credit score but don’t have the time before you need the financing then subprime auto loans may be better for you. As long as you can make the payments on time, you can actually improve your credit score and still have the financing you need for a reliable vehicle.

If you are tired of getting rejected for traditional loans and credit options then a subprime loan can be for you.

Leasing a car makes sense for certain situations but if you can’t afford a car lease or don’t end up qualifying for one then you will need to get a subprime auto loan.

In the subprime loan market, it’s easier for borrowers to get the money they need and be approved. This approval process can be smoother and get you on the road sooner.

Where to Go for Subprime Auto Loans

It’s best to find subprime auto loans at a bank or credit union instead of the dealership. It’s never a good idea to step into the dealership without preapproved financing, especially if you have subprime credit. When you get preapproved financing from a lender other than the dealer, it can help you with your car buying budget based on what you can afford, instead of the car you are trying to buy.

What Happens if You Don’t Pay Back a Subprime Loan?

If you aren’t able to repay your subprime auto loan then your current financial situation is only going to get worse. If you have just one late payment then you may be able to redeem yourself with a long series of on-time payments. Many lenders don’t want you to default on the loan and will help work with you to make sure that doesn’t happen. Some unscrupulous lenders have built a business model where they do repossess your car and then sell it to another borrower with credit issues.

If you fail to make your payments and you default on your loan then it can destroy what little you have left of your credit score. This can make it much harder or impossible to borrow again. You will also risk losing your vehicle. In some states, you can also be liable for the difference between the amount the lender gets from selling your vehicle and the balance of the loan. Subprime auto lenders may have electronic auto trackers installed in order to make finding the car easier so they can repossess it. Some even go a step further with a system that disables the vehicle until a you make a payment or they have the car back.

If you think you are in danger of missing a payment then the best course of action is to contact your lender. You don’t want to just hide from them. Describe your circumstances and see if you can find a solution. If your issue is just a one-time thing then you may be able to skip a payment. If it’s a long-term issue then they can work with you to sell the vehicle so that you won’t have your loan obligation.

Can You Avoid Getting Subprime Auto Loans?

If you can avoid getting a subprime auto loan, it may be in your best interest. There are some things you can do to get a new vehicle when you have a bad credit score.

Improve Your Score

Take a look at your credit history and be sure to correct any errors in your reports. Then work to improve your credit score. While it’s easy to destroy your score with a bad financial decision, raising it can take patience and time. You want to have several months of on-time bill payments and start reducing your credit card debt. This can help get you out of the subprime lending market and into a much less expensive loan. Even if you don’t raise your score to get into the next category of borrowers, if you can show an improvement in the history of payments, it can convince a loan officer at a smaller financial institution to give you a chance to prove yourself.

Find a Second-Chance Lending Program

Some lenders, especially community banks and credit unions, have what they call second-chance borrowing programs for their customers with not the best credit history. The loan terms can be restrictive but a second-chance loan can be a stepping stone in the right direction to avoiding non-subprime auto loans.

Use a Co-Signer

Have a friend or family member co-sign a more traditional loan. This can be helpful for getting you in a car but be aware that it can be dangerous to the credit score of your co-signer. Before you have a friend or family member co-sign a loan, both you and the co-signer should understand the risk and benefits.

Refinancing

If you don’t have a choice to accept anything other than a subprime auto loan then you need to make sure you pay all your payments on time and in full. After doing this for the first year, you can put yourself in a position to be able to refinance the loan with better loan terms and interest rates.

What Is the Most You Can Borrow with a Subprime Auto Loan?

You can only qualify for subprime auto loans? Then you have to be more realistic about your car choices. You need to choose a vehicle that fits in your budget. So you need to see how much car you can afford. With a budget in place, you can focus on cars that fit within those parameters.

When dealing with subprime auto loans, there can be a few layers to the qualification process. They can affect how much you can borrow. Prime lenders typically look at your income, debts, and credit score. Then you get approved if you have good credit. Subprime lenders have some extra qualifications, such as a minimum income per month, a certain amount of time at your current job, and references. These extra qualifications will of course vary by lender and your credit score. But they can also affect how much you can borrow.

Since lenders usually look beyond your credit score, one of the main things that they will focus on is your debt-to-income ratio. If the ratio is high then you may not qualify at all. If it’s high but not high enough to disqualify you, it adds to the cost of your car paymen. Along with your cost of insurance.

While there is no set answer on how much you can borrow, it’s important to shop aroun. This way you can get an idea of what you qualify for before you go car shopping. This way, you aren’t going to go over budget and won’t risk finding out you can’t qualify after you already found a car.

How Do Subprime Loans Affect Your Credit Score?

Subprime loans will affect your credit just like any other loan will. Your payment history is such an important factor in your score. So it’s absolutely necessary to make payments on time if you hope to improve your score in the future. One way to make sure that this happens is to set up automatic payments from your checking account.

Make sure that there is always enough in your account in order to cover what you owe. Then you don’t have to face additional fees. Or overdraft your checking account. If you do miss a payment keep in mind the following. It won’t be reported as late until 30 days after the due date. You may face fees if you are just a few days late. But it doesn’t show up on your credit report right away. Make up the missed payment as soon as you can. Before it shows up on the report and affects your credit.

Work on Your Credit Before Applying

If you are hoping to avoid subprime auto loans then it helps to work on your credit before applying. It’s possible to get approved if your financing needs aren’t urgent. But it’s helpful if you can wait. This way you can get a better interest rate and be in a better place financially.

Start by checking your credit score. If you get a copy of your credit report, it may have specific areas that you need to work on. It’s possible that you have fallen behind on payments with a credit card or loan. So work to catch up as fast as possible and make sure to make on-time payments moving forward. If your credit utilization rate is high then start to pay down debt as soon as you can. While improving your credit score can take some time, it’s worth it, in the long run, to save you money.

Final Thoughts

While subprime auto loans are here to help get you in a vehicle quickly, there are also some risks. You will likely pay more in interest and fees. However, there are options available and if you shop around, you can find the best rate for your situation. Research your various options and don’t take the first offer you get unless it is, in fact, the best offer. Avoid other short-term loan options, such as auto title loans or payday loans, in order to get into a car.

How to Save Money on Your Auto Loan

Buying a car is one of the most expensive purchases you will make. Although you may not be able to do anything about the rising auto prices, you can save money on your auto loan by lowering the interest rate you will pay.  When using auto finance options to pay for a vehicle, you will end up paying a higher amount when compared to the actual value, thanks to the interest. By the time you finish paying of the loan, the value of the vehicle has gone down significantly from when you bought it. Paying with cash may be a better way to purchase a vehicle but it’s just not a reality for most people.

Ways to Cut the Cost of an Auto Loan

If you are hoping to save money on your auto loan, there are some ways you can cut down on the costs.

Work on Your Credit

The terms of an auto loan will be based on your credit. If you have perfect credit then it’s easier for you to get the lowest interest ate. But if you don’t then you may have to pay more. If there are issues with your credit and you don’t need to get a new car right now then consider waiting until you can work on your score. Just a small decrease in the interest rate can save you a lot of money over the lifetime of the loan.

Getting a Car Loan with Bad Credit: Money Speed Bump

Don’t Borrow Too Little

If you only need a few thousand dollars to purchase a new vehicle then don’t get an auto loan. Instead, save money. Since small loans are paid off quicker than larger loans, the bank doesn’t make as much money. Smaller loans will have a higher interest rate than bigger loans so the bank can make more money off you. If the car purchase is an emergency then this may be the only option you have.

Don’t Get a Loan at the Dealership

The dealership is the middleman when selling you a car and also the middleman when you are set up with a lease or loan. Middlemen always get paid and the person that is paying is you. You should get a financing quote from the dealer because it may be a good option but if you don’t get other quotes, you could be paying too much money. You are doing some shopping around for your car so you should do the same for the loan.

Buy a Cheaper Car

This may seem like obvious advice but many people are in a habit of purchasing more than they can afford. Do you need to purchase a new car or can you get a pre-owned model? Do you really need a luxury car that will just put you more in debt? It’s worth considering if you are looking to save money on your auto loan.

Does It Make Sense to Lease or Buy?

Buying a new car can be overwhelming and one of the decisions you are faced with is whether or not to lease or buy.

Buying a Car

Purchasing a car is one of the straightforward ways of getting it and you either pay cash or use a loan to cover the cost. The great benefit of buying a car is that one day you will own it and be free of vehicle payments until you decide to purchase another one. The car can be yours to sell at any time and you won’t be locked into a fixed ownership premium.

Car insurance premiums can be lower and you don’t have to worry about any mileage restrictions. The downside is that there will be a higher monthly payment. Dealers may also require a down payment so out-of-pocket costs will be higher when buying a car. As you pay down the loan you have the ability to build equity in the car. However, this may not be the case since depreciation can take a toll on the value. Buyers with down payments can find themselves in an upside-down situation where the car is worth less than what the buyer owes.

Leasing a Car

For those who haven’t leased before, the process can seem confusing. There are some benefits to leasing a car. The greatest advantage is the lower out-of-pocket cost when maintaining and acquiring the car. Leases don’t require much of a down payment and the monthly payments are usually lower. You also get the advantage of getting a new car every few years. The drawback is you have a payment but you never get to own the vehicle. Depending on the lease you choose, when the term is up you could have the option of financing the remaining value, which means you will own it once you finish making payments.

Mileage restrictions also are another disadvantage. If you drive a lot during the year then buying a car may be a better choice. If you do drive a lot, there could be the option for an open-ended lease, which may not have as many mileage restrictions. You may get charged more for insurance for lease vehicles. Depending on your driving record, age, and where you live, the additional cost may be small but it’s still something to consider.

How to Shop for an Auto Loan

In order to save money on your auto loan, you have to shop around and shop smart.

Shop the Loan Separately from the Car

Before you start negotiating the extra features, price, and car you want, start the loan application process with banks, credit unions, and other well-respected online lenders. Banks may be the best, especially smaller ones. Credit unions are also a good choice. You can get prequalification for a loan, which then allows you to go to the dealer with a blank check for the specified amount. Once you have a solid written contract with the dealer then you can get a good financing deal. Use an auto loan estimator to help with the shopping process.

Limit the Loan Shopping to Two Weeks

When you apply for a loan, your credit score will go down a bit, which can make it harder to shop for a prime rate loan. If you make the applications within a two-week period then it’s only one inquiry.

Look at Your Own Credit History

Be sure to get copies of your credit report from the three main agencies. With an auto loan, you may have some more wiggle room in terms of your score as opposed to a mortgage. If you are looking for auto loans for bad credit online may be your best option.

Shop for the Total Loan Amount and Not Just the Monthly Payment

The only time you should be considering the monthly payment is when you calculate how much you want to spend on the car. Other than that one time, don’t focus on monthly payments. Some lenders want you to focus on payments in order to get you to spend more money by extending the number of months you pay. This allows them to make more in interest and you will have to drive your car longer.

Don’t Assume You Are Getting the Best Rate

Lenders are not obligated to give you the best rate you qualify for on a loan. Let your lender know you are shopping around or have another offer and you may be more likely to see a better rate.

Read the Fine Print

It’s best to take the loan paperwork home and read it before signing anything. If the dealer or lender won’t let you do this then walk away from the offer. A loan is a binding agreement that will last you for years so you need to know what’s in it. There are some things that warrant some special attention. If you see mandatory binding arbitration, know that this will take your right to court to court away.

A variable interest rate could mean that you end up with a high payment. Find the highest possible payment and see if you can afford it. If you can’t then the loan isn’t right for you. See if there are any prepayment penalties. Learn how much it costs you if you want to pay off the loan early or refinance it. Is what the lender promised you in the contract? Oral promises can be impossible to enforce so you need to make sure it’s in the written paperwork.

Check the Math

If the monthly payment is slightly different from your own calculations then this means the loan may not have the terms you negotiated.

Avoid Any Conditional Financing

Don’t take a car from the dealer until the financing is finalized. If the financing is conditional or contingent then it can be changed later and you could be stuck with terms you don’t want.

Investigate the Lender

Check on any lender you are dealing with ahead of time. Search online to learn what any customers or former customers are saying. While online comments should be taken with caution, you may be able to use them as an early warning for any possible problems. You can also consult with us about your lender choice.

Refinancing Your Auto Loan

One of the ways to save money on your auto loan is by refinancing. You need to carefully look at your current situation to see if you are actually getting a better deal.

See How Refinancing Can Benefit You

The first step is finding how much you owe on your existing loan. Then find out how much interest you will pay on the existing loan. Add together the remaining amount owed and the estimated interest payment and this is the number you want to beat with your new loan.

Figure Out What You Want

Shop around to see what other lenders are offering you. If the interest rates aren’t lower than the current rate you have then refinancing may not make sense. If your goal is to lower your monthly payment since you are struggling to pay it then refinancing but extending your loan term can help with that. This shouldn’t be done unless absolutely necessary since you will pay more for the car in total. If you aren’t in danger of defaulting on your current loan and there aren’t any lower interest rates available to you then it’s best to keep working on your credit score. Remember the higher your credit score, the better interest rate you may be offered. If there are lower rates available then it’s time to calculate the monthly payment and total cost for different loan lengths.

Different Options

If you shorten your loan term then you pay less for the car overall since the shorter term lowers the amount of interest you are paying. The disadvantage with that is the monthly payment is higher than some other options.

If you keep the loan term the same, it can mean a small decrease in your monthly payment, which allows you to save money on your auto loan over the life of the loan.

When you extend the term, you get a lower monthly payment but you do pay more.

Once you run the numbers and understand the outcome of the different term lengths, you will have the information you need to determine if auto refinancing actually benefits you. You may see that you won’t save enough to warrant the process of refinancing or you may find that it does. Your decision should be based on where you see the most value, whether it’s a reduction in the cost of your car or lowered monthly payments.

Mistakes You Could Be Making with Your Auto Loan

If you want to save on your auto loan, you should avoid making some of these common mistakes.

Not Investigating All Your Options

The key to saving the most money with an auto loan is to investigate all your potential lending options and this can include the dealership.

Going by the Rate Alone

The rate is only part of the equation. You also need to know how much of a down payment is required and the terms of the loan before you make a decision.

Following Your Emotions

You need to do your research up front and know what car you want. You also need to know what you are prepared to pay. Don’t cave if the dealer pushes another model or color or doesn’t waver on the price.

Not Reviewing Your Credit Score First

Know what your score is so you now what the lender is looking at. If there are any errors on your report, you can get them fixed beforehand.

Being Quick to Accept the Dealership’s Offer

Dealerships may offer a higher rate because they get financing from banks. They raise the rates to make a profit so it’s always necessary to shop around.

Focusing on the Payments over Price

If you are more focused on the monthly payments than the overall price of the car, you could be paying more in the long run. Consider the price of the car, the terms, length of the loan, and the APR.

Looking for a Car First

If you are serous about getting a car, you need to start shopping around for financing first and determine how much you can afford before you start car shopping.

Not Being Able to Walk Away

Once you begin negotiations, you don’t need to take the offer. If you don’t like the offer or how the negotiations are headed then you need to be prepared to walk away.

Not Taking the Shorter Loan Term

Cars depreciate rather quickly so you want to finish paying off the loan in the shortest amount of time. Monthly payments will be higher with shorter-term loans but you will also be paying less in interest.

Not Determining What You Can Afford

When it comes to car buying, not everyone takes the payments into careful consideration. Since it may only be for three years, you may not evaluate the impact these payments have on your budget but you need to. Before you buy a car, you need to determine how much you can put down and how much you can spend according to your monthly budget.

Ways to Pay Off Your Car Loan Early

A typical car loan can take you 60 to 72 months to pay off, which equals five to six years. That is a lot of interest to pay so if you want to pay off the loan faster and save money on your auto loan with interest, there are some things you can do.

Pay Half Your Monthly Payment Every Two Weeks

If your lender lets you do this then you should consider it. When you pay every two weeks, you are actually making 26 half payments throughout the year, which adds up to 13 full payments instead of 12. While you may not save you as much on your auto loan, you will be able to repay the loan much faster. This amounts to months that you can get back for your life and it’s not a bad transition if you get paid every two weeks.

Round Up

Instead of just paying your payment, round up to the nearest $50 to help repay the loan quicker. This can also help you save money on your auto loan. For example, if you have a $10,000 loan with a 10% interest rate for 60 months, the monthly payment is about $412. If you round up and pay $450 then you will have paid the loan in 47 months instead of 60 and can save over $2,000 in interest.

Make One Large Payment Every Year

This is a similar version to rounding up. It doesn’t matter when you make the payment and it can help you save money on your auto loan.

Make at Least One Large Payment on the Loan

If you make at least one large extra payment each year, you can save even more on interest and save money on your auto loan. The earlier you make a big payment, the sooner you will be able to pay off the car loan.

Never Skip Payments

Even though some lenders may let you skip a payment once or twice a year, it’s best to resist the temptation. Skipping payments doesn’t save you money on your auto loan. It instead lengthens the term of the loan and will cost you more in interest.

Refinance the Loan

You can negotiate a new monthly payment and pay off date when you refinance your loan. In order to save money on your auto loan, you should only do this if you actually get a lower monthly payment and a sooner pay off date. Refinancing may sometimes not make sense. You don’t want to just lower your monthly payment and lengthen the loan term since you will end up paying the same principal and then more in interest.

Have to Save Money to Buy a Car

Even though you can get an auto loan, it’s still get a good idea to start saving money for a car. By having some saved for a down payment, you can save money on your auto loan since you will be paying less principal and interest. Having lower monthly payments on your auto loan can allow you to put money into other obligations, such as your credit card debt, mortgage, or student loan payments. A larger payment can also make it harder to afford if you have a financial emergency. If you skip your car payment then you fall behind on the loan and this can lead to repossession and default. Defaulting on the loan can hurt your credit and the ability to take out any loans in the future.

1. Set a Budget

It can be hard to determine what you can afford if you haven’t looked at the numbers. Go over your monthly financial obligations and your income. Keep track of your expenses so you can get an idea of what you are spending on eating out, shopping, and groceries. Then calculate how much room you would have in your budget for a car payment. This can also help you decide how much you should save for a down payment. A rule of thumb is that you don’t want to spend more than 15% of your monthly income on a car payment.

2. Save Automatically

If you don’t already have a savings account then now is the time to start. When setting up a savings account, look for a high-yield one that has low fees and competitive interest rates. When you have a savings account that is separate from your checking account, it can help you keep track of how much money you have to put toward a down payment on a car. If you have everything in one account then it can be hard to track your savings. When you set up a savings account, set up an automatic contributions for every time you get paid.

3. Get a Side Job

If your current full-time job just pays for your existing bills then you may need to find some extra income in order to save for a car. Getting a side job or hustle can help you save some extra and faster. Side jobs can include working as a virtual assistant, selling goods online, or delivering groceries. Earning some extra cash can go a long way. It allows you to put more toward a car so you can borrow less and save money on your auto loan.

4. Cut Out Any Extra Expenses

If you find that your current budget doesn’t allow you to save much for a car then you need to lower some expenses. You don’t have to permanently go without something but trim some costs for a set period of time. If you aren’t using your gym membership then cancel it for now and find free ways to workout instead.

5. Sell or Trade in Your Old Car

When you trade in a vehicle, it can help fund the next car purchase. It can be a good idea to lower the amount you owe on your next vehicle. In order to get the most out of this, you want to see what other dealers are offering for your car. Research what the vehicle is likely worth and then see if the trade-in offer seems reasonable. Be careful about negative equity on your current car before you decide to do a trade in. This means that you owe more on the car loan than what your car is worth. You can also research selling the car yourself to a private party. This can help you get more money from the sale.

Final Thoughts

When you want to save money on your auto loan, there are different things you can do. First, look at ways to pay off your car early. Since this will lessen the amount of interest you are paying. Having a down payment can lessen how much you have to borrow so it helps to know how to save for a car. Know the steps to shopping for an auto loan so you can get the best deal possible. Refinancing may be an option to save money on your auto loan. But you need to make sure the situation will make sense for you. Also know what common mistakes you could be making so you don’t get stuck in a financing trap.

Auto Loans with Low Income: Ride Here

There are many reasons you might consider getting an auto loan. Are you purchasing a new or used car and do not have enough money in the bank to pay for this vehicle out of pocket? Are you looking for a chance to refinance an auto loan you already have? If either of these situations reflect your own personal situation, then it may be time to consider getting an auto loan? Are you concerned about being able to buy the car you need because you have a low income or bad credit. Don’t worry — it is possible to get auto loans with low income and bad credit. You can even get auto loans for bad credit online.

How to Get an Auto Loan with Low Income

Getting a personal loan is so easy it can be done in three simple steps. If you are looking for auto loans with low income, then you may feel like your task is impossible. Trust me, it’s not. You can do this. Searching for auto loans with low income just requires you to work a little bit harder. For instance, you cannot be afraid to ask for help. There are many companies whose sole purpose is to help consumers find auto loans with low income.

These companies offer their services for free and help consumers find a local dealership in their area that will help you find auto loans with low income. Or they help you find a lender that is right for you. You usually apply by filling out a short form online that can be completed in just a few minutes.

When it comes to getting an auto loan with low income, patience is the key. You may stumble upon several obstacles, and surely getting a loan will not be as easy. But it is far from impossible. With the right help, you may find great auto lenders and get approved for a loan.

How to Get an Auto Loan with Bad Credit

While we’re at it, let’s talk about another unfavorable situation – bad credit. Same as with low income, bad credit is an obstacle to getting a loan. It will not stop you from getting a loan, but it can hurt your chances of getting a loan with a low-interest rate. In fact, if you are looking for an auto loan with bad credit, then there are auto loans out there made just for you.

In order to get auto loans with bad credit, you should consider requesting a meeting with a loan officer. At this meeting, you can show the loan officer who you are, with a positive presentation and demeanor, as well as explain what your personal situation is. This meeting can give you a leg up in your chances of getting an auto loan.

In addition to meeting with a loan officer, consider the cosigner or collateral option. If you have bad credit, then you may still be able to get an auto loan if you have someone cosign with you. This other cosigner is agreeing to the absolute responsibility of repaying the auto loan, so that if you do not pay, then the lender knows that someone will. If you are not comfortable asking someone to cosign with you, then you can consider putting up collateral for an auto loan. This means that if you do not make the payments on your auto loan, you could lose the collateral you put up for the loan, such as your car or house.

Auto Loan Basics

Auto loan basics are basics for a reason: they’re the basics that everyone should know. This does not mean you should feel bad or uneducated because you do not know something here, but if you don’t know something mentioned below, then it means you are definitely in the right place. If you are considering getting an auto loan, then you need to make yourself familiar with these auto loan basics:

What Is a Car Loan and How Does It Work?

There are two types of auto loans. You can either get direct lending or dealership financing. If you choose direct lending, then you get to make the arrangements of your auto loan with the financial institution of your choice. If you choose dealership financing, however, you will have to make the arrangements through the dealership. Both options have pros and cons, and in general, the two options are not dramatically different.

Direct Lending

When choosing to go with direct lending, you are choosing more freedom. Because you can choose whichever financial institution you most prefer, you have the freedom to comparison shop for auto lenders. Auto loan shopping allows you to find an option that fits your budget, with realistic payment options and better rates and terms. Plus, if you have pre-approved financing, then you are sometimes able to negotiate a better price.

Dealership Financing

Dealership financing can be a simpler option. You do not have to deal with auto loan comparison shopping, spending a lot of time and effort to find the auto loan with the best terms. If you choose dealership financing, then the dealership will do this for you. They will either do the financing internally — if they have their own financing department — or do the financing externally — through a finance company that they have a prior agreement with. One benefit of dealership financing is that it means you already know what car you want, which means that you already know how much financing you need before getting your loan. This could save you money in the long run, so that you don’t have to pay back even more — including that compounded interest — in the future.

The Car Loan Process

Getting a car loan isn’t very difficult, but it can be made even easier if you understand the car loan process. The first thing you should do is to use an online auto loan calculator to set a realistic budget for yourself. Once you have your budget, you should check your current credit report, so that you have an idea of what loan options you will have. It is possible to get auto loans for bad credit online, but it is a good idea to inform yourself of your situation early on in the process. This can allow you to set realistic expectations for what your loan options will be.

Before getting a car loan, it is a good idea to know what you are looking for in a car. Research is essential. If there is a specific make or model you prefer, or any special features you know you do not want to go without, then you should keep that in mind when researching the range of prices for similar cars to your preferences. Many people trust and rely on the Kelley Blue Book to see what current average prices of specific cars are.

Once you know what your current financial status — including your credit score — is and what your will be likely to have to pay on average for the kind of car you want to buy, then it is time to do some auto loan shopping online. This can help you find the best auto loan for you and your personal needs.

Auto Loan Basics Spelled Out: Lending 101

Types of Loans

Before you make a commitment to getting an auto loan, you should know what your options are. There are many types of loans out there, and there is certainly an option out there that is right for you. An auto loan is just one type of personal loan. Below are some other types of personal loans:

Unsecured Loan

An unsecured loan is a type of personal loan that does not have collateral backing it up. This means that if you do not make your monthly loan payments in full and on time every month, then the lender cannot just take something from you in order to make up for the money you did not pay. This means that an unsecured loan is more risky for lenders. Though very uncommon, it is possible to get an unsecured auto loan.

Secured Loan

A secured loan is a type of personal loan that does have collateral backing it up. Items put up for collateral are typically worth a lot of money, so that they can make up for whatever you decide not to pay on your loan. For instance, if you get a secured auto loan and do not make your payments on the loan on time, then your new car can be taken away. Auto loans are most often secured loans.

Open-End Credit

Open-end credit is a type of credit where you can “withdraw money as you need it, over an extended period of time.” Two common options for open-end credit are lines of credit and credit cards. This is a good option for someone who is, for instance, working on a project where they need to take out multiple smaller sums of money, depending on what individual expenses they have. One advantage of open-end credit is that you typically do not have to pay interest on whatever money you do not withdraw.

Closed-End Credit

This is a type of credit where you get one set lump sum. Closed-end credit is typically done in the format of a traditional loan. You request to borrow a certain amount of money, and you get that amount of money in a lump sum. Then, you must repay this lump sum, plus interest, over an agreed-upon period of time. If you decide to get a single payment loan, then you will be required to pay the entirety of the loan — what you borrowed plus interest — in one lump sum.

Auto Loan Rates

It is impossible to say what your auto loan interest rate will be without knowing your exact situation. Rates can vary from lender to lender, and dealers may push special promotions in order to quickly get rid of certain stock. Regardless of these uncertainties, there are some things you can be certain will have an effect on what rate you end up getting.

The Impact of Credit History on Auto Loans for Low Income

Your credit history will be sure to affect what interest rate you get. Though it is possible to get auto loans for bad credit online, you are not likely to be able to get an interest rate as low as someone who has good credit. On the other hand, getting a loan — and repaying the full amount due on time every month — could actually help strengthen your credit. For more information about how getting a personal loan can help your credit, read on here.

The Length of the Loan

The length of the loan can also have an impact on your interest rate. Generally, though not always, loans that will last longer have higher rates. Sometimes you don’t have a choice; if you cannot afford to take an option with a shorter loan, then get the longer loan that is more realistic for you, however, if you can afford to get a shorter loan, then that is a better option that will allow you to spend less overall in the end.

Which Car You Want

Not all cars are equal. What you buy will determine how high or low your interest rate is. If you are interested in financing to purchase a new car, then you may be able to take advantage of introductory rates or special financing. If, on the other hand, you are interested in financing to purchase a used car, then you may not be able to find such deals. This is because “used cars are considered a greater risk for lenders, since their resale value is already lower and the chances are good you’ll owe more than the car is technically worth at some point down the road.” Used cars may come with a lower sale price, but they also come with higher interest rates.

A graph showing the variation in auto loan rates by credit score.

What You Need to Know About Auto Loan Shopping

If you have decided to take part in auto loan shopping, then there are some basics that you need to know before taking action. First of all, you should budget before you shop for auto loans. If you budget before beginning auto loan shopping, then you will be more aware of your realistic expectations in finding an auto loan. For instance, budgeting will help you determine how much you are able to pay up front for a car, as well as how much you will be able to pay in monthly payments after you get the car.

Besides budgeting, it is important to explore all of your options. This is why auto loan shopping is so important. If you take the time to look at multiple auto lenders, then you will see what options are available — with what terms and rates. This could help you get better rates in the end, since you usually do not get the best offer on your first try. Exploring your options will help you find the absolute best auto loan for you.

For more information about what you need to know about auto loan shopping, such as information on auto loan discrimination and how to negotiate auto loans, read on here.

Auto Loan Statistical Overview

You shouldn’t feel alone if you are considering getting an auto loan. According to the Federal Reserve Bank of New York, auto loan debt is on the rise. In fact, auto loan debt has been on the rise for the past decade, however, while people with lower credit scores — credit scores of 719 or less — have plateaued recently, people with higher credit scores — credit scored of 720 and higher — have “[continued] to grow as a percentage of total borrowing.” This indicates, among other things, that “people across the U.S. are improving their overall credit scores.” For more information about the statistical overview of auto loans, read on here.

Conclusion

Getting auto loans with low income can be stressful, but with the help provided above, the process should be much easier. You can also get help from Loanry and look into our lender recommendations.

Bad Credit Auto Loans To Get Driving Fast

Unless you live in a major city like Chicago, New York City or Tokyo, you’ll need a car, truck, motorcycle or moped to get around. The alternatives are constant Lyfts and Ubers or taking the bus or subway. While both options, vehicle ownership and mass transit, cost money, owning a vehicle of your own has convenience advantages.

Purchasing one’s first car also stands as a rite of passage into adulthood. When you buy a car, you negotiate with the salesperson and arrange your financing. It is a show of your adulting skills. So, what do you do if you have little to no savings, no credit or bad credit, but need the convenience of a vehicle? You apply for Bad Credit Auto Loans and motorcycle loans designed specifically for those with bad credit.

Get an Auto Loan Fast

Avoid jumping into bad credit auto loans without doing your research. Read on to know more about the process.

Just because an institution says it offers auto loans for those with bad credit, does not mean that loan will work great for you. It may have a short pay back term or an exceedingly high interest rate. Take all of the following steps to get your finances ready for loan applications before you try to apply for a loan. You’ll save yourself time and money. Then shop for bad credit auto loans online.

Loan application may even require an application fee that accompanies it. These range from $20 to $50. That can add up. It is best to wait until you know you and your credit score are ready to apply.

“Know your budget, check your credit score, and review your existing credit accounts to ensure they are reported accurately,” said Joe Pendergast, the vice president of consumer lending for Navy Federal Credit Union in an interview with Credit.com.

Get Your Credit Score Ready

First, your definition of bad credit probably does not match that of a financial institution. Credit scores can range from 300 to 900. Banks and credit unions tend to think of bad credit risks beginning at about a score 640 or less. You might think that your score of 540 is pretty good, but banks see it differently. Banks know that you do not have to be rich to have a terrific credit score. You simply have to manage money really well. Many people of normal means have high credit scores. So, when they see a lower credit score, they see a person who does not manage money well. You can change their perception of you by changing how you manage things. You may still only qualify for bad credit auto loans, but you’ll get a better interest rate. Errors on a credit report negatively impact score, which is a big disadvantage when trying to secure an auto loan interest rate

Here are a few things you can do, starting today, to increase your credit score and achieve a better perception of yourself by financial institutions. After completing all of these steps you may qualify for more than just bad credit auto loans.

1. Check Your Credit Report

You can quickly increase your credit score by checking your credit reports. It’s free to do this once per year. Obtain a report from each of the three major credit reporting agencies.

a. Check each credit report for inconsistencies or errors. Not every agency will have the same data points. Some agencies collect more data than others because they include aspects the others do not in their report. For instance, Experian lets individuals opt into a collection of data

from their utility payments and cell phone payments. The credit reporting agency then includes this in the calculation of the score.

b. Address report inconsistencies and errors to the credit reporting agency. Include proof of the correct information, such as payment, credit card or bank statements showing the payment dates and accounts. It will take a few weeks for the agency to correct the data, but once they do, your score will be recalculated.

2. Pay Your Bills on Time

Pay your bills on time. It sounds so simple, but it raises your score so quickly. You can increase your credit score after only six months of timely payments.

You can make this easier by consolidating your loans, either by taking out a consolidation loan that lets you pay off each of the smaller loans fully or by using a non-profit agency like CareOne that helps you contact each creditor and restructure your debt. This reduces your monthly payment to each creditor. It also results in a single payment you make to the non-profit that it then distributes to each creditor, for you. This method can quickly reduce your overall debt. Since another party makes the payment distribution and is legally required to distribute the funds in a timely manner, it means your payments are never late. This quickly raises your credit score by making on time payments.

3. Raise Your Income

You can do this by asking for a raise at your existing job or by adding another stream of income. If you have been with your current employer for a while, ask for a raise. You can typically obtain a raise if you have been employed there for a substantial amount of time and have performed well.

You could add another income stream by getting a second job or starting a freelance business. Get a part-time job and work at it for a few months before applying for the loan. Six months is a good length before applying for a loan. You will need about six months of paystubs to show a loan officer.

Either bank the money you earn from your second job or use it to pay off existing credit cards and loans. This reduces your debt-to-loan ratio so long as you keep the credit card open after paying it off and that raises your credit score. If you choose the savings account option, you should take the account statements to the loan officer to show that if you did lose your job for a few months, you’d have means to still pay the loan payments.

You can earn money by freelancing as an appointment setter, personal assistant, blogger on a topic you know well, Lyft or Uber driver or some other pursuit. While you will not have traditional pay stubs, you can take print outs of your PayPal reports that show your earnings. You can also show the results of your labor by banking everything in a savings account.

4. How Budgets and Loan Calculators Help

You can find out what you need your income level to be to obtain a loan for a specific amount. Look at your current budget. Your total loan repayments including the bad credit auto loan or motorcycle loan you want to obtain, should equal less than 30 percent of your monthly income. If it would all require more than 30 percent, you have three options:

  1. get a second job or freelance to increase your income,
  2. pay off existing debts before applying for the new loan,
  3. apply for a smaller loan.

Use a Loan Calculator

You can also use an auto loan estimator to help find the affordable options for you. You can calculate your monthly payments using various options for down payment and loan term, plus interest rate. This lets you see how easily certain options fit into your budget.

While you may have your heart set on a brand new, $30,000 car, you may be able to reasonably afford a $15,000 used car. It can be the same model car, but a different year. Perhaps you have Norton or Harley-Davidson dreams, but a used Yamaha budget. Find vehicle options that fit your budget, not vehicles that kill your budget.

Once you are ready to apply for bad credit auto loans or motorcycle loans, you can do a few things to increase your chances of getting a “yes” from the lending institution. Instead of traipsing around town trying to speak to each bank and credit union, use Loanry to go auto loan shopping. It offers much more than bad credit auto loans and simplifies your process.

Motorcycle and Auto Loan Shopping with Loanry

Loanry provides individuals and businesses with a simple process for vetting financial lenders. Its participating institutions offer a plethora of loan types, including no credit or Bad Credit Auto Loans. Follow these quick steps to use this loan mall that makes finding a loan a breeze.

  1. Visit Loanry Auto Loans
  2. Choose the loan type you need at the top of the screen.
  3. Complete the short form with your basic information.
  4. Loanry sorts through its database of financial institutions.
  5. Loanry may help you find a lender
  6. You complete each lender’s long application.
  7. A lender work with you directly.

Shopping for an Auto Loan: What You Should Know

Loanry does not make loans. It simply helps you find a lender. These lenders work with Loanry’s site to offer auto loans products  including bad credit auto loans. That cuts down on the research you have to do. Using Loanry helps you determine which institutions offer loan products who may be willing to work for your need situation. It also saves you unneeded application fees to banks or financial lenders whose qualifications you did not meet.

The Loanry tool cuts your research time, so can determine the appropriate lenders to approach more quickly.

Using it also may reduce the number of requests on your credit report. These report requests happen every time you apply for credit, no matter what type. Each application for bad credit auto loans or motorcycle loans creates a request that lowers your credit score just a little. If you apply for many credit cards and loans, you will reduce your score, even if you did not take any out or were refused for each one.

While Loanry is not a lending institution, it does offer educational articles and tools to search for auto loan lender for bad credit – to help its users make better decisions about money. It offers these financial educational articles for free.

Once you are ready to apply for loans, you may find that your bad credit offers you limited opportunities. Before you go to a loan shark, explore your other options. While you will still end up paying higher interest than someone who could afford a prime interest rate loan, you do not have to resort to that high of an interest rate. You do have alternate options though since the Internet has spawned the peer-to-peer craze.

Try a Different Kind of Legitimate Lender

You have new legitimate bad credit auto loan opportunities besides banks and credit unions. Approach peer-to-peer lending services. This uses a one-to-one concept similar to that of an angel investor, except, you pay back the funds in full with interest.

Also, approach online lenders. Some offer smaller loans, some offer no credit or Bad Credit Auto Loans.

Either way, conduct extensive research on any lending institution of any type before you apply or provide any identifying information such as your Social Security number. Have an accountant look at the loan product of any non-traditional lender, before you apply and definitely before you sign any papers. Once you find a few options you’d like to pursue, you are ready to make your applications. Here are a few tips to help you obtain the best results from your bad credit auto loans applications.

Request a Loan Officer Meeting

If you have bad credit, you can help yourself by requesting a meeting with a loan officer. Even your local bank may have an online application, but you can request a loan meeting at the local branch of their organization. These meetings improve your chances of a “yes” from the bank or credit union by showing them your personage – presentation and demeanor – and important finance information that does not appear in your credit report or go into your credit score.

Paperwork to Take With You

Your credit score reflects your repayment of credit cards and loans. What it does not include is your monthly mortgage or rent, bills or private loan payments. Experian, Equifax and TransUnion do not get these items reported to them nor do they always have accurate information on your employer or salary. Take your pay stubs from all jobs you maintain with you to the meeting proving you have regular employment. This also establishes your amount of regular income on a regular time cycle, such as weekly or monthly.

Take with you statements from your checking accounts, savings accounts, Certificate of Deposits, stocks and bonds and/or retirement fund or annuity. If you receive any type of supplemental income, such as alimony, child support, veteran’s benefits, etc. you should include documentation of this. All of these income streams document your ability to continue payments if your employer reduces your hours or terminates your employment.

Present this documentation to the financial lender to strengthen your application. You can also take in proof of your timely payment of monthly bills to utilities, your phone company and your landlord. These items show that you pay on time and in full.

Sometimes, no matter what you do, the bank determines that it cannot offer bad credit auto loans to you unless it has evidence you can pay it back immediately if needed. They do this by requiring you to have either a cosigner or collateral.

The Cosigner Option

This is common for teenagers or college students buying their first car. These two groups rarely have credit established, so they can only qualify for bad credit auto loans. You use a cosigner to boost your credit worthiness.

The term cosigner refers to an individual who applies for the loan with you. They add their awesome credit score to yours to help you obtain the loan, but in the process, they accept absolute responsibility for the repayment of the auto loan. While you actually make the payments, if you miss one, it hurts their credit, too. If you default on the loan, the bank expects them to pay for it. This risk transfer takes the pressure off of the lender but means it takes special person to step up as your cosigner. In many cases, a parent will cosign a loan for their teenager.

Put Up Collateral

You can put up collateral for a loan. This provides a guarantee to the bank that you will pay back the loan. Collateral refers to a tangible asset that the bank could claim, then sell, to cover the amount of your loan. Examples include a boat, houseboat, vehicle, land or stocks and bonds.

Save Up for a Big Down Payment

You can improve your ability to qualify for a loan easily. Save your money up for a large down payment. This reduces the amount of money you need to borrow. It can also help you get a “yes” from the lending institution. Another plus is it can net you a lower interest rate to put down a larger down payment.

Smart Money Tip!

“Know the price other dealerships in the area are offering so you can make an informed purchase,” Joe Pendergast, the vice president of consumer lending for Navy Federal Credit Union in an interview with Credit.com.

Research the Autos or Motorcycles

Do a bit of local research before you apply for a loan. You need to find out the car or motorcycle you want and how much it will cost you locally. The prices you see online do not relate to what you’ll find locally. So, as Shutt advises, start your research online to broadly determine vehicles you can afford. This also prepares you for visiting local car lots.

At the local lots, the salespeople will try to do their job – to get you to spend as much money as possible. Remember that the car you choose determines the loan you need. Choose a reasonable car to borrow less and pay less interest.

Show what a tough negotiator you are by pitting one dealer’s price against the other’s. Many dealers will match or beat the price of the other’s and that could get you a rebate, discount or other special savings. It’s your job to get yourself the best deal on a car.

It’s Loan Application Time

You have done your research and you think you are ready to buy. You’ve also researched various loan options and have looked at the cars. You have priced them. You are ready to obtain your financing so you can make your big purchase.

Car Lot Financing

Beware of using the car lot’s financing. Some car dealers mark up the interest rate from the one the actual bank rate, then the two split the excess interest fifty-fifty. Carefully read any offers from car lots partnered with credit unions, too, because they often do the same thing. Apply directly to the credit union to get the best rate.

Loanry Listings

Revisit your interaction you received from a lender who use Loanry. Read their terms carefully. Choose from them one and make your application. If they extend a loan to you, you can go purchase your car quickly. Some lenders that use Loanry deliver the funds electronically and will deposit the funds into your bank account within a couple of days. You then make your purchase.

If you get turned down, you can keep auto loan shopping. They may have a slightly higher interest rate or some other terms that made you rank them lower than others, but you may get a “yes” from them when you got a “no” from the first bank.

However, remember that each application could create a hit on your credit report. Using Loanry may reduce these hits, but if you apply directly to local banks or credit unions, each of those application creates a unique hit to your credit report which lowers your score a little bit. An application through the car lot does the same thing.

Even if you do not get a yes, you need to stop applying if you get three “nos” in a row so that you do not damage your newly re-built credit score excessively. It could be time to ask for a private loan from a parent or guardian to fund your car, truck, moped or motorcycle purchase. You can borrow the money from family and create a monthly or weekly repayment schedule. This gets you on the road without further damage to your credit.

On the Car Lot

When you go to actually make the purchase, the sales person will try to upsell you. Do not fall for it. Stick with the vehicle you have decided to buy in advance.

Stick to the total value of the vehicle you want to buy. Whatever you do, do not let the salesperson trick you into saying what monthly payment you can afford. They will simply manipulate other factors of the loan, such as its duration, to make a more expensive vehicle seem affordable. You are not getting a deal. This is called the “monthly payment scheme” and every car salesperson gets taught this.

If you are approved for a $17,000 loan, then buy the car or motorcycle that you had chosen in the first place. You will end up with the vehicle you researched at the price you planned on paying. You will already know the loan duration since you researched it. Remember, the duration combined with the interest rate of the loan determines how much extra you will pay to the financial lender for the privilege of getting funding for your car purchase.

Buying a car with bad credit can still be done. You simply need to start earlier in the loan process with your research. Loanry can help with that. Let Loanry help you find an auto loan lender for bad credit online today.