Apply for a used car loan with bad credit

How to get the lowest used car loan rates?

You need a loan to buy a car, but with fair credit – usually a credit score between 630 and 689 – you are worried about being able to claim a good interest rate. You may also fear that with a lower credit score, the dealer will increase your rate above what you really deserve.

However, by following these steps, you will get the lowest used car loan rates.


Before you go to the dealership, make sure you have thought about your loan requirements. Try to answer the following questions:

Check your credit

You can get a free credit score from a number of sources, including NerdWallet. These will not be exactly the same models that dealerships use, but since credit scoring models emphasize the same factors, it will give you a good idea of ​​your position.

Then, examine your credit reports to see if there are any errors. Use AnnualLoanRecord to request reports from the three major reporting agencies, Equifax, Experian or TransUnion. You are entitled to at least one free report from each of them every 12 months.

If there are errors in your credit reports, dispute them with credit bureaus.

If there are any mistakes that could reduce your score, challenge the mistakes with the credit bureaus. Once the correction is applied, your credit should improve in a few months or sooner. With a higher credit score, you will get a car loan with a lower interest rate.

Know where your credit is

Get your credit score, weekly. We’ll help you monitor your credit and track your progress.

Get pre-approved auto loan

Before you go to the dealership, ask for a pre-approved car loan. This will show you what type of interest rate you qualify for and simplify the process of buying a car by allowing you to trade as a cash buyer at the dealership. Then, when you make an agreement, you can let the finance manager try to beat the interest rate on your pre-approved loan.

Design your business

Use an auto loan calculator to compare offers and see which monthly payment will best fit your budget. If you have doubts about your ability to obtain a loan, plan to pay a larger down payment, up to 20% of the purchase price of the car.

Experts recommend loan terms of 36 months for used cars and 60 months for new cars.

Car loans need to be repaid as quickly as possible, as the car gets older, you may have to pay for repairs and monthly car payments, or have to pay more to the lender than the value of your car. car. Experts recommend setting the term of a used car loan at 36 months, even if it adds to payments. If you buy a new car, you can finance for 60 months.

Remember that when you use the calculator you will have to pay sales taxes and fees. In many states this could represent an additional 10% of the purchase price of the car.

Know what the dealer is looking for

Lenders, including the dealer, will review your self-specific credit score, which focuses on the financial history of your car. The factors that influence this score include your payment history on previous auto loans, a bankruptcy settled or reported on a car loan, and whether you have ever had a vehicle taken over.

Lenders, including the dealer, will review your specific credit score.

The second element that dealers and lenders examine is the stability of their income. Ideally, if you have a fair credit score – and therefore probably a correct self-specific score – you have good income stability to compensate for it.

Try to increase your credit from just to good

If you can afford to wait for the purchase of a car after raising your credit from just to good, do it. If you need a new or new car immediately, get the best loan you can get now and try to refinance your car loan later, as your credit improves.

With better credit, you can get better financing options and lower rates for auto insurance.

With better credit, you can get better financing options and lower rates for auto insurance. Once you have challenged score reduction errors in your reports, you can proceed in different ways to help you develop your credit. Focus on paying all your bills on time and reduce the amount of your credit limit used on each credit card.

With these steps, you should see a positive effect on your credit score and, hopefully, push it to just right. These steps can help you get a better auto loan or refinance your loan on better terms.

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