Getting A Car Loan With Bad Credit And How This Can Help Improve Your Credit Score
If your credit score is lower than what you would like and you need to buy a car, there is good news. Getting a car loan is relatively easy for people with bad credit, and it offers a second benefit. When you get a car loan, you will have the perfect opportunity to improve your credit score. Here are two key things you may want to know about this before you go car shopping.
Tips For Getting A Good Car Loan With Bad Credit
The interest rate you will pay on your car loan is determined by two things. The first thing is the current interest rates for car loans, and the second factor is your credit. People with excellent credit will get approved for car loans with low interest rates, and this is primarily because they pose very little risk to the lenders. People with low credit scores can get approved for car loans; however, the interest rates they pay will typically be much higher than those of people with good credit.
If you want to get the best rate on a car loan, you may want to:
- Shop around – Getting approved from several different car lenders within a short period of time is a good option. By doing this, you will have the opportunity to find the lender with the best rates. Another advantage is if you shop around quickly, all the inquiries on your credit report will be viewed as one. This typically involves shopping around and finding a loan within 30 days. This means it will not impact your score dramatically, which is one important factor to consider.
- Get a cosigner – When you get a cosigner, you might be able to get a better rate on your loan. The good news is that getting a loan with a cosigner can still help you improve your credit score, because the loan will appear on the credit reports of both parties.
- Settle for a higher rate – You should also realize that if you can get a loan with a high interest rate, you may have the ability to refinance the loan in a year or two. By waiting for a while, your credit score may improve, which could help you land a car loan with a lower rate.
As you shop around and plan for this purchase, you should realize that getting a car loan could have a large impact on your credit score.
How A Car Loan Can Help You Improve Your Credit Score
Any type of loan you get can help or hurt your credit score. The key to using a loan to improve your credit score is making sure you make your payments each month. If you fail to make your payments, having a car loan on your credit report will cause your score to decrease.
Having a car loan can help your credit score by offering a way for you to build your credit history. When you make your car payment each month, the lender will report it to the credit bureau. Your credit report will show the current balance you owe on the car as well as your payment history.
Your credit score is made up of numerous things, but 35% of it is based on payment history. If you can make every payment on time, your credit score will slowly begin increasing over the lifetime of the loan. When your credit score gets high enough to qualify for a better interest rate, you could always refinance your car loan.
If you really need a new car and have bad credit, you still have a good chance of qualifying for a loan. If you are interested in applying, contact a car dealership that offers auto financing, such as Leopardi Auto Sales.