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Bad Credit Auto Loan Tips

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Everyone knows that bad credit can affect most of our financial moves, including auto loan application. However, bad credit shouldn’t be seen as hindrance to finding the perfect deal for your situation.

Don’t judge your credit

Your credit might not be dazzling, but you can’t just assume the worst. Don’t go to the lender and think that you’d be lucky enough to qualify at all. Having far from perfect credit doesn’t automatically mean you are not in any more position to shop around and bargain for the best deal.

Shoot high

It doesn’t mean that if your credit score qualified you for a subprime mortgage before you will also get a subprime auto loan now, because sometimes you might actually be eligible for prime or near-prime loan. Aiming for less than what your credit score deserves will not exactly give you the most favorable terms.

Shop around

Not every lender will view your credit rating in the same way, and even if you got rejected from one, you might have a chance with others. You should also try comparing deals and offers rather than jumping on the first deal you come across with. In addition, you should avoid lenders that specifically cater to bad credit clients.

Use familiarity to your advantage

It doesn’t hurt to try even if you think it’s impossible to qualify for a loan. For higher chances, you can visit a bank where you have a savings or checking account, or your credit union. Being their client, they might be able to help you out. You might also want to check out if your employer or insurance company sponsors car loans.

Don’t do this alone

The importance of having someone with you during the application goes way beyond having a witness. With someone by your side, preferably one who can act cautious, curious, and all-knowing, the lender will think twice before trying to trick or corner you into a bad deal.

Do not focus on the monthly payments

A common mistake by many buyers is being fooled into a low APR deal without looking at the overall term of the loan. If you want the best deal, your target is to achieve the lowest monthly payments at the shortest possible time. If the loan needs to be extended in order to lower your monthly payments, it just means you can’t afford the purchase after all.

Watch out for add-ons

Most often when looking for a car loan, especially for subprime clients, you will encounter expensive extras, such as longer warranties and insurance, which is often cheaper when purchased outside of the contract. Do not submit to any deal that requires purchase of these add-ons, as most of the time they are expensive and don’t really provide the coverage that you need.

Be careful of “yo-yo” sales

“Yo-yo” sales are those deals wherein the costs of down payment and monthly payments suddenly increase. Chances of this happening are greater for bad credit clients, so make sure that all terms of the contract are final and not subject to change before you sign the contract and leave with your new car.

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