Not everyone has great credit. However, most people still need help to buy a car in the form of an auto loan. So what do you do if you have bad credit and need a car loan? Luckily, you can apply for bad credit auto loans and compare multiple offers using LendingTree. Here's what you need to know.
What Are Bad Credit Auto Loans?
A bad credit auto loan is simply a regular auto loan with some adjustments based on your credit. Usually, the major adjustment between a good credit auto loan and a bad credit auto loan is the interest rate. As your credit score decreases, lenders tend to charge a higher interest rate for auto loans. Credit scores are used as predictors of the likelihood of a person making their payments on time. Since lenders take a greater risk lending money to people with lower credit scores, it makes sense they charge more money to cover the risk of nonpayment.
How Do You Get a Bad Credit Auto Loan?
You can get a bad credit auto loan just like you'd get any other auto loan. The first step is finding your credit score which you can do for free at My LendingTree. Once you know your credit score, you can start looking for auto loan programs that offer loans for people with your particular credit score.
In order to save both time and frustration looking for loans, you can fill out one simple application on LendingTree. LendingTree will then shop around with multiple lenders on your behalf and let you know if you've been approved. If you're approved, LendingTree will let you know what offers you have available to you.
What to Do If You Aren't Approved Right Away
If you aren't approved right away, you still have options to obtain financing for a new to you car. The first option is improving your credit. There are many ways to help increase your credit score including making all of your payments on time, reducing the amount of debt you owe relative to your credit limits, increasing the age of your credit history, avoid applying for new loans and diversifying the types of credit you use.
Of course, if you need a bad credit auto loan immediately, you can't afford to wait. If that's the case, LendingTree can often match you with a retail dealer that specializes in providing auto loans for people with bad credit.
How to Shop for the Best Bad Credit Auto Loan
Shopping for the best bad credit auto loan is much like shopping for any other type of loan. The goal of shopping around for any loan is to find the best loan for your particular situation. To do that, you must know what your ultimate goal is when borrowing money. For some, the goal is to pay the least amount of interest possible. If that is your goal, simply add up all the payments, fees and other costs of each auto loan and pick the one with the lowest grand total that has a monthly payment that fits your budget.
However, others wish to find the loan with the lowest monthly payment. If that is your goal, simply compare payments and pick the lowest one. But be careful if you are picking the loan with the lowest payment. Often, loans with the lowest payments are low because the time period for repayment has been extended. This may lead to paying more in interest payments over the life of the loan.
Only you know what makes a perfect bad credit auto loan for your particular situation. Apply for an auto loan today on LendingTree to get multiple quotes you can compare. Then, pick the loan that best meets your goals. It's that simple!