subject: I Have Really Bad Credit What Can I Do To Ensure My Car Loan's Approval? [print this page] How do you define really bad credit first of all? Well bad credit can be mathematically defined as an individual with his or her credit score below 680, so in theory if you have a score of 679 you are considered to be a sub prime customer when it comes to car loans. Really bad credit usually means you are far below that mark, usually less than 600 all together. You could have declared bankruptcy recently, consolidation of your loans, and maxed out all your credit cards without any repayment. Usually when you have these types of score, you wouldn't be able to obtain a car loan through the normal channels. But all hopes are not lost completely, there are specialized services out there that will accept these "high risk" loans. Try for a second to think from the lender's perspective, if some one is looking to borrow money from you, but you know this person has a bad habit of not paying back their loans. Would you still offer them the money? What if they are truly desperate for a car loan, and they just recently got a new job, and is willing to pay you interest on your loan. It is like you have a friend that constantly is borrowing money from you, and you are concerned he or she may not be able to repay. Would you take a chance on that? Or would you politely decline. But wait a second the banks and lenders are in the business of loaning money, so what can I do to better my chances of approval. Well to off balance the higher risk involved in these types of loans, the lender usually request a higher interest rate, and shorter term. Although this can be completely and logically backward in the real world, but it makes sense to them because it will minimize their exposure to the risk.
To improve your chances, you should clear as many small loans as possible and try to save some form of down payment for your car loan. The lenders and banks like to see if you can be on the hook for something, whether big or small, it shows to them you have something to lose, therefore most likely to pay back your loan in full. Next thing that will help you is to choose the right vehicle. Pick a vehicle that is reliable, with excellent resale value to show the lenders this car will not breakdown in the near future, and you will continue to make your payment on it. In the event if you default on your loan, the banks would like to know if they can recover as much money back as possible. It is another way to minimize their risk involved by lending you the money. Another good way to increase your chances is to find a suitable co-signer for your loan, your co-signer should be family or spouse not just a friends. Because they will be responsible for your loan in case of default, and make sure they are someone you can trust with your financial future.
