The best way to get a lower interest rate if you have poor credit is to add a cosigner with good credit to your loan. A cosigner payday loans without checking account in Youngstown, OH is someone who accepts responsibility for the loan and will be on the hook with collections if you miss any payments.
While it may not lower your interest rate, placing a larger down payment or opting for a higher monthly payment can help you save money on a bad credit auto loan. A shorter loan term may also reduce overall costs. The more quickly you pay off your auto loan, the less interest you will ultimately accumulate.
Tips For Improving Your Credit Score
A good credit score is vital to saving money and has benefits beyond a low interest rate on your auto loan. In several states, your credit history may also be used to determine your auto insurance premium. If you have bad credit, you should work to improve it as soon as possible. However, raising your credit score cannot be accomplished overnight.
- Open a credit card: Don’t let your credit balance get too high, and pay off your bill in full each month. This shows lenders that you are dependable and can be trusted to make your loan payments.
- Increase your credit limits: The amount of credit you’re using affects your score. For example, if you had a credit card with a limit of $1,000 and had a balance of $500, you’d be using 50 percent of your credit. However, if you asked your bank to increase your limit to $2,000, you’d only be using 25 percent of your credit. This can raise your score.
- Debt consolidation: Try to consolidate your debts into one place with the lowest interest rates possible.
- Pay down existing debt: This will save you money in the long run and help your credit score.
- Wait: Certain negative factors will fall off your report after a number of years. Hard credit checks stop affecting your score after two years. Late payments, collections, and bankruptcies fall off your report after seven years.
- Credit monitoring: Many of the major credit bureaus, such as Experian, Transunion, and Equifax, offer credit monitoring and tools for improving your credit. Take advantage of these programs.
- Check your report: Request a copy of your own credit report and look for errors or outstanding debts you may have forgotten about.
If you initially take out a bad credit auto loan but later improve your credit score, be sure to consider auto loan refinancing. This involves taking a new loan with better interest rates to pay off the existing loan. You may want to refinance your auto loan after your credit score moves above 660 and 780.
At the end of the day, there are a variety of lenders that work with bad credit borrowers. That’s why it’s a good idea to work with a comparison service or get multiple prequalification offers to see what’s available to you.
FAQ: Bad Credit Auto Loans
Yes, you can get a car loan if your credit score is 500. According to Experian, over 17 percent of auto loans in 2021 were issued to borrowers with scores below 500.
Ultimately, yes, you can find a car with a credit score of 450. You’ll need to work with a lender that doesn’t have a minimum credit score requirement. Be aware that borrowers at this level pay high interest rates of 14 percent or more.
If you have a credit score of 300, some lenders will work with you if you can also show that you have a steady income. You will pay high interest rates with this type of credit score. Another option is to find a cosigner to lower your interest rate.
Auto Credit Express
As you can see from the table above, auto loan interest rates increase steeply for borrowers with credit scores of 660 and below. You will also notice that interest rates for new car purchases tend to be lower than those for used car purchases. However, if money is tight, you may still save more by purchasing a used car, though you will pay a higher interest rate.