Is it possible to get an auto loan with bad credit?

For anyone who has struggled with their credit history, they know that re-establishing credit can be a challenge, and although some things can be paid for by cash, transportation is a basic need that often requires financing.

For those who have wondered about their eligibility for an auto loan, the good news is that bad credit car financing can be accomplished. The two mainstream approaches towards this to either apply on-line or through a local bank or credit union. The advantage of going on-line is the ability to find one site that will direct you to several lending institutions who are willing to quote you different rates and terms. This can be a real time saver as well as give you some choices.

Another option for securing an auto loan is to go through the financing department of a car dealership. It's important to know that although those extremely low advertised rates do exist, they are there only for those with the very best credit historys. Even with a bad credit history, the dealership may still pressure you use them for financing because the F&I (finance and insurance) person gets a commission for each agreement they put together. Dealership interest rates can have a tendency to be a little high to begin with. If you have bad credit, you may find a better deal somewhere else, so it's important to do a little comparison shopping.

The most productive way to find financing is go on-line and ask for quotes through an auto loan broker. You just complete an online form and then the broker will negotiate with the lenders to help you get you the most reasonable rates based on your credit score and employment history. Even with a poor credit history, if you are currently employed and can show your ability make the monthly payments, there should be a loan program for you somewhere

It is important to realize that although obtaining a car loan with bad credit is now much easier, there are some drawbacks. For example if your credit score is below a certain level (around 600), you will end up paying a higher interest rate. The lenders may also ask you to come up with a bigger down paymnt. Their reasoning is that they are taking on more risk by financing someone with a bad credit history and therefore must be compensated accordingly. One way to reduce your interest rate and monthly payment is to come up with a larger down payment.

Although it's tempting to get as many auto insurance quotes as possible, it's important to know your credit score can be lowered based on number of inquires. If you already have a low score based on a bad credit history, lowering your score even further would not be advantageous. The recommendation is that you submit your application to no more than three auto lenders.

Another temptation for those with with bad credit who want to own a car is to take over the payments from someone else. Usually these private-party sellers are desperate and can't sell their car through more traditional ways. The idea here is that you give them a monthly payment and they in turn continue to pay their lending institution.

Although it is possible to own a car this way, it is not recommended. If you try to obtain insurance on a vehicle you're not titled on, and the loan is in someone else's name, the insurance company probably won't cover you. If the seller tries to keep their insurance going, just adding you as a driver, their insurance may be cancelled because the vehicle is not in the seller's possession. If the seller forgets to tell you, you could be uninsured without even knowing it.

Car financing with bad credit isn't impossible. There are many traditional financing options you can still use to buy a vehicle, and once you show yourself credit worthy by making all your payments on time, it will be easier to buy that next car at a much better rate..