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How To Get An Auto Loan With Bad Credit

getting an auto loan

Bad credit doesn’t necessarily mean that an auto loan is out of reach. Though lenders prefer borrowers with a credit score of 760 or higher, you may still be able to purchase a car with an imperfect credit history. Higher interest rates will probably accompany your loan, but shopping around and comparing offers can help you to find a fair price.

Making sure all details are finalized before leaving the lenders office can help to prevent any scams from taking place.

Check Your Credit Score

It can be tempting to take any auto loan offer that comes along if your credit is less than ideal. However, this mindset will likely cause you to settle for an overpriced loan. Check your credit score and history to gain a realistic perspective of your financial profile. VantageScore, a credit-scoring model, considers your payment history to be the most influential factor when calculating a credit score. Start by correcting any inaccuracies that may exist on your credit report, such as a debt incorrectly listed as outstanding, as this can lower your score. Fixing such inaccuracies can help your numbers to improve. Allow one to two months for the corrections to be made on your credit report before applying for a car loan.

Another way to ensure you get the best deal possible is to limit the time you spend shopping for an auto loan to a two-week period, which prevents your credit score from falling any further. When a creditor such as an auto lender checks your credit report, this counts as a hard inquiry. Numerous hard inquiries at once can appear as if you are taking out a lot of credit, which makes you a higher risk to lenders. However, VantageScore uses a 14-day grace period where all hard inquiries are treated as just one credit pull, so apply for all your auto loans within that window to safeguard your credit.

Save Money Where You Can

Poor credit may cause higher interest rates, but there are plenty of ways to save money on your car loan. For starters, try choosing a shorter term loan. A 3-year loan will likely carry a lower interest rate than a 5-year loan. Your monthly premiums will be higher on the 3-year plan, but you’ll pay off the loan faster and pay less overall in the end. Also, consider buying a new car rather than one that is used — a loan for the latter is usually more expensive.

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Add-Ons and Scams

Making sure all details are finalized before leaving the lenders office can help to prevent any scams from taking place. The most infamous of these is probably yo-yo financing, where you take possession of the car before the contract is signed and then the dealer raises the price. Also, skip all the bells and whistles that the lender offers, such as paint protection and rustproofing. Add-ons mean extra money in the long term. Double-check your contract before signing it to be sure that you’re only paying for what you actually want.

Disclaimer: The information posted to this blog was accurate at the time it was initially published. We do not guarantee the accuracy or completeness of the information provided. The information contained in the TransUnion blog is provided for educational purposes only and does not constitute legal or financial advice. You should consult your own attorney or financial adviser regarding your particular situation. For complete details of any product mentioned, visit This site is governed by the TransUnion Interactive privacy policy located here.

What You Need to Know:

The credit scores provided are based on the VantageScore® 3.0 model.  Lenders use a variety of credit scores and are likely to use a credit score different from VantageScore® 3.0 to assess your creditworthiness.

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