auto loanFinding an Auto Loan may be at the top of your list of things to do if your car is a ticking time bomb, ready to break down at any moment. Or, if you are simply looking for a new car, you’ll still want to research all of your available loan options. This is especially true if you know you have a less than perfect credit score. With a little research you will be able to find a lender offering instant approval auto loans even for those with negative credit histories.

The best place to get your auto loan is, of course, your bank or credit union. But, for those with a poor credit score, a subprime lender may be your only answer. A quick search for “bad credit auto loans” will turn up several million results, and shows that car loans are available for almost everyone. Pick several sites off the first page. Look for lenders who offer instant approval, quotes, and don’t ask for much personal information.

Now, you’ll want to contact your local Better Business Bureau and ask about your selected lenders. Find out which, if any, have had complaints or negative feedback. If you don’t find any red flags for your picks, simply fill out their short application forms and wait for an answer (usually within 48 hours). If accepted the lenders will tell you how much you can borrow and the interest rate. Compare as many quotes as possible to ensure you’re getting the best terms and rates possible.

If you’ve been searching for an auto loan for a new or used vehicle, then you probably already know that finding the right auto financing can be a discouraging experience. Many lenders have arrangements with dealerships and offer incentives to them for referrals. While this makes money for the dealership, and makes it easier to finance your car, it might not be in your best interest to take their offer. In most cases, these lenders charge higher interest rates for the convenience of dealership financing. If you want the lowest rates possible, look for lenders on your own. There are thousands of loan companies online that will approve your auto loan quickly.

When gathering quotes online make sure that the interest rate will remain constant throughout the life of the loan. This can save you costly payment increases later. Inquire if there is a prepayment penalty should you decide to pay off the loan early. A prepayment penalty can wipe out any savings you hoped for. You don’t want any surprises as you plan your financial strategy and improve your credit score.

A good auto loan company will provide you with several payment options. You should be able to make your installment loan payments through the mail, by phone, or on the lender’s website. And, a good lender should be able to process and approve your loan quickly. It’s frustrating to find the perfect vehicle and then have to wait to find out whether or not your loan has been approved.

You can save a great deal of money, when you finance a car, by understanding the process. For many years auto customers would finance for 3-5 years (my first new car cost under $3,000). Today however with the average price of a new car at $30,000, people are lowering the amount of their monthly payment by opting for terms of 6-8 years. While a longer term auto loan will cut your monthly payment, it will also carry a higher interest rate, and increase the total cost of your vehicle. Instead of a longer term auto loan, here are a few ways to reduce your monthly payments without increasing the overall cost.

  • Consider a home equity loan (if you’re a homeowner) to pay off the vehicle immediately. Home equity loans offer much lower interest rates than standard auto loans.
  • Before you show up at the dealer, try to get pre-qualified for a loan. Dealers financing always comes at a higher interest rate than a bank, credit union, or savings and loan will offer. As with any loan, interest is the “900 pound gorilla”.
  • Make a bigger down payment. Depending on your credit score, auto loans are available for as little as 5% down. But, increasing your down payment to 20% or more will reduce the length of your loan, and save you a ton in interest payments.
  • If you can only afford a Chevy, don’t go shopping for a Cadillac or let a car salesman twist your arm (or psych you) into a car you can´t afford. Loan are a tricky business, so read the fine print. Know what you are (and will be) spending and only buy what you can afford.
  • Knowing your credit score (FICO) can save a lot of money as the interest rate on your loan will depend on it. To get your score, log onto the website of any of the 3 credit rating agencies – Experian, Equifax and Transunion. You’re entitled by law to one free report per year.
  • Be honest with yourself about your repayment capability. Bad credit auto loans in large amounts are available to just about anyone with a job. If repayment of the loan on top of the expenses for routine maintenance and fuel costs is going to be a problem, you may want to sharpen your pencil and do some more figuring.

Online lenders will work hard to get you an auto loan no matter how bad your credit score is. It is, after all, how they make their living. There are certain minimum requirements when qualifying for a bad credit auto loan. A job, and proof of income is primary. You’ll also need proof of residence. The size of the required down payment depends on your credit score. The worse your credit history, the more of the risk you will be asked to share by anteing up more of your own money.

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