How Does Credit Score Impact Bad Credit Auto Loan Costs?
Your car is on its last legs and you know you need a new car right away. Your poor credit score is preventing you from getting loans at an affordable rate of interest. In such circumstances, car loans for people with bad credit can come to your rescue.
Not all regular lenders offer auto loans for poor credit borrowers but there are still quite a few options in the market for you to choose from. There are, however, some points to keep in mind about your credit score before you start looking for a bad credit auto loan lender.
What is Your Credit Score?
Check your credit score before you start shopping for car loans for people with bad credit. The lower your score the more stringent the lender’s terms for the loan may become. The rate of interest rises in inverse proportion to your credit score so that the lower your score, the higher the rate may be that is charged on your loan.
It is best for you to request your credit score from the rating agencies well before you start loan shopping. Remember that while your request does not affect your credit rating, repeated requests for your score from different lenders does.
Improving the Score
Once you have your credit report, see if any errors have been made in reporting your debt history. If any timely repayments or loan repayments have been missed out, ensure that the rating agency adds these to your report so that it presents an accurate picture of your financial health.
This is the time to see if there is anything you can do to eliminate some of the debts, such as paying off a long due bill or negotiating with a creditor for a partial pay off. All of these can go a long way in improving your credit score.
Know Where You Stand
Generally, only borrowers with credit scores below 640 need to opt for car loans for people with bad credit. Even if you do not qualify for regular loans and are limited to only bad credit loans, you may still be in a reasonably good bargaining position if you have a good repayment history with a previous auto loan.
Pay off any dues you still have on your old car, if you intend to trade it in when you buy your new one. Any existing lien on the trade in may require additional cash deposit from your side. In addition, failing to pay off the old loan also puts you in the unenviable position of having to deal with an existing lender as well as the new one who funds your current car purchase.
Keeping these points in mind helps you start loan shopping with a good idea of how much you can take as loan. With this as your budget, it becomes an easy task to identify the vehicles that you can buy to meet your transportation needs.