Bad credit auto loan- not easy yet not impossible to get

The global economic recession has seen bad credit becoming extremely commonplace even with individuals who previously held excellent credit rating. Although most banks are still wary of extending loans to individuals with bad credit history the stigma attached to it however has abated and they are willing to look into giving loans to such people.

Auto loans are one of the commonest loans for which individuals apply on a regular basis and that’s because vehicles are expensive and can eat into a substantial amount of your budget if you decide to purchase it outright. Fortunately, bad credit auto loan is also extremely common and is availed of regularly by individuals as this also gives an opportunity to them to improve their credit score.

Although initially it may appear to be tough to get approval when you apply for car loan with bad credit, it is actually not all that difficult to get it if you have a steady income at present. The finance company or the individual from whom you are taking the loan will ask for certain documents like pay slips, bank statements and other personal information to get an idea of your financial situation. This is to see whether you will be able to make the monthly repayments.

A car loan with bad credit is bound to come with higher interest rates but you can always take the option of refinancing with lower rates of interest after a few regular monthly payments. Some lenders require a high down payment to secure their interest in view of your poor credit history. This is in fact not a bad idea as paying a large down payment means that your monthly payments become smaller. The repayment period for good credit holders is normally 60 months but for those with poor credit the term is lower and ranges from 24 to 48 months.

If you are stuck with very poor credit and yet are looking for a smaller down payment with low rate of interest coupled with a longer repayment period then you have to get hold of a co-signer. Your co-signer can be your spouse or parents who have a good credit score. This gives the lender the guarantee that their money is in safe hands and it also gives you the opportunity to make an improvement to your credit score. For students getting parents as co-signers works out well as it gives them a leg-up in making timely monthly payments and thus improving their credit rating. The other option is to apply for a secured loan in case of bad credit which means that you have to give collateral as security against your loan. The collateral stands being repossessed if you default on payments. 

A good credit rating undoubtedly comes with advantageous terms and conditions but even with a bad credit you can find a good auto loan if you hunt hard enough.