Auto Financing is Possible If You Know Where To Look
For those who have been turned down in the past for an auto loan because of bad credit history this article is for you. There’s a lot of different reasons why people need a loan for a car. Perhaps you’re looking for something more reliable, or classier, or something that just gets better gas mileage. Whatever the case, if you’ve been turned down in the past there is still hope and you can take action today.
Your primary goal should not be to just get an auto loan. You want an auto loan that has a decent interest rate as well. There’s a lot of various subprime lenders who are capable of helping you get the loan you need but you should be careful when working with these lenders. Don’t sign for anything you can’t afford over the long run… and please don’t sign any contracts for interest rates that are in the 20% or above. It’s just not worth it.
Down Payments On Auto Loans Will Lower Your Interest Rates
Let’s face it you probably feel like you’re at the mercy of lenders right now, but that’s not true. You can take control of your finances and leverage what little credit history you have left to get a lower interest rate on your next auto loan. One of those ways is through a downpayment. Another way is through your credit score.
First, find a way to put a down payment on your next car
Down Payments tell auto lenders that you’re serous about this car investment. The sweet spot is when you can get the lender to decrease the overall cost of the car just enough that you can slap your down payment on top and get the car for 80% of it’s blue book value. If you can do that. You’re going to drastically decrease the loan percentage.
Here’s how this works:
Let’s just say you find a car for 10,000. You look up the Kelley Blue Book value and find that the owner or dealership is selling the car for the exact blue book value. Call up the owner or dealer and let them know you’re interested in the car. After you’ve setup a time to look at the car get pre-approved for a loan for the amount you will be spending which is $8000. Once approved you’re now in a position to haggle. Call up the owner or dealer and let them know you really want to look at the car but only have a budget of $8000 to spend. If you’re talking with a dealer he’s going to say something like, “just come on down and we’ll work something out.” A salesman will sometimes get so wrapped up in just making a sale that they forget they aren’t making much money off of it. The trick, sell the salesman on selling you the car. Stick to you’re guns on your budget. You need to walk out of there with the loan covering 80% of the cars original cost. This will more then likely drop your percentage rate by 1 percent or more. There’s a few other tricks you can try like:
- Not purchasing your car till the end of the month from a dealer – they need to fill their end of the month quotas and will often move cars at very low profits.
- Before you arrive make the commitment to walk away from a deal that is not going your way – This will keep you relaxed so you don’t have to sign any bad contracts. The salesman might make you feel like you’d be getting the best deal in the world but the fact is…you’re probably not.
If you do really want the car this is where a down payment comes in handy. Just use the extra $500 or $1000 to make the up the difference for the 80% number. That way the dealer or owner is happy and you’ve got a lower interest rate.
Second, you need to know your credit score
Knowing your credit score through a free credit report will get you an even lower interest rate but you need to be willing to do a little legwork.
Complete Auto Loans offers a free credit score after the auto loan application but there’s a myriad of other places who also offer free credit scores as well. Once you get your score and credit report you can start working through the list of lenders you owe money to. The goal is simple, make settlements for the money owed and get them to take the negative score off of your record.
Most lenders are extremely interested in working with you on this. I’ve seen lenders drop 50% from the original amount owed so they can get the debt off of their books. The most important thing is that you communicate with them and work out a deal so you can get rid of your bad credit history.