Taking out a car loan is supposed to be a simple task. The basic steps are pretty straightforward, and anybody can go through the motions of submitting an application. However, due to their credit score, not everybody gets approved for a car loan. Essentially, the standard steps required to take out a car loan are as follows:
a. Find lender
b. Fill out application
c. Review terms of loan offer
d. Sign on the dotted line if you like the terms
However, when you dig a bit deeper you quickly discover that there is a lot more going on here in the background. And, most of it happens behind the scenes, away from the view of the customer. You see, between steps “b” and “c” above is that not-so-little detail called the loan review process.
During the loan review, the lender is basically making sure that the lender would be a smart person to lend money to. After all, many borrowers are not creditworthy. Meaning: if the lender extended the person a car loan, that person has a high probability of not repaying the loan. And that would be very bad for business, in the eyes of the lender.
It is this loan review process that can trip up a lot of the would-be auto loan borrowers. The lenders check the person’s credit score, and in doing so they may find out that the person has a low score – say, one under 650. A low score means a low probability of repaying the loan: and a high chance of loan rejection.
So, if you have a bad credit score, what can you do to improve your chances of being able to successfully take out a car loan? If you are looking for bad credit car loans, here are 5 ways to stack the odds in your favor:
1. Get to know your FICO score and credit reports. The best way to do this is to order your 3 reports (one from each major bureau), make yourself a cup of coffee or tea, and spend about 30 minutes per report reviewing them. Look for any obvious misreported items and other errors, including signs of identity theft.
2. Call any friends you have who also have a bad credit score and ask them where they got their car loans. Make a note of those lenders’ names.
3. Now, do an online search for bad credit car loan lenders. Look for a directory site that lists multiple lenders to choose from. These lenders cater to people in your situation and know how to work with you, despite your credit score.
4. Research the websites of each lender. Make sure to note details such as how long they have been in business, as well as any customer testimonials they list there. You want to find lenders who seem legitimate, while skipping over the fly-by-night ones.
5. Apply to all of the lenders on your list. Applying online should be a fairly quick process. They can usually check your credit score, review your application for accuracy, and get an approval out to you in 30 minutes or less.
Make sure to follow through and apply to all of the lenders on your list – no sense in giving up the search until you know you have gotten the best-possible deal.