How to Get A Car Loan with Bad Credit Score

Last Updated : March 25, 2016, 11:15 a.m.

Are you planning to buy a car loan, but suffering from bad credit history? Well, nothing to worry because even if you have a bad credit history, it is possible for you to avail a car loan in this situation. Just read this article below to know how to get a car loan, despite of having a low or bad credit history.

Subprime Lending

Well if you have a bad credit history, you are considered to be into the category of such borrowers which are known as subprime. However, when it comes to subprime lending market, it would not be wrong to say that it is absolutely a different portion of the industry. When someone does not qualifies for a car loan from bank or traditional lender, he/she will be referred to the subprime market. Moreover, as far as subprime lenders are concerned, they usually work with such people who have low credit scores. Furthermore, the best thing about these lenders is the fact that they have high tolerance for risk as compared to traditional lender. So, through this way, those who do not have an exceptional credit score can have the option of subprime lenders to choose.

Credit Score

There is no denying on the fact that your credit score is the actual factor that determine whether you come into this subprime category or not. Furthermore, different lenders set different criteria as far as credit score is concerned. There are certain parameters on the basis of which they decide to work with credit score. If we talk about in general, there is only one rule, i.e. if you have a credit score of 640 or less than that, you are eglibile to come under the category of subprime lending.

Interest Rates

If you are eligible to get a car loan from a subprime lender, it would not be wrong to say that you will be supposed to pay the higher rate of interest. However, the lenders look this situation as an investment option. More to the point, one of the main rules of investing here in order to take the higher risk on investment is, to able to bring the higher rate of return. If a person has a bad credit, he is considered on a higher risk of investment. As a result, the lender will going to increase the rate of interest of your car loan. However, in various cases, the rate of interest for a car loan is actually twice as what you would pay in case with a normal lender.

Compare Lenders

Whenever you look out for a car loan, always make sure to compare different lenders. Do not go by one choice, try to analyze and compare different lenders just to know what all extra benefits or features they are offering. There are times, when many renowned lenders can take your advantage by offering you everything together in just one package. All you need to do is just keep your eyes and nose open and be attentive towards what you are getting in your car loan deal. You should not only compare the lenders, but the rate of interest, processing fees or last, but not the least closing costs that lenders usually charge from you usually. Once you are satisfied with the benefits you are getting from your favorite lender, all you need to do is just fill out an application form to avail a car loan. The lenders then verify your income, evaluate your credit file, and then finally offer you a loan, if everything goes well.