My First Car Loan

Your credit score follows you around and plays a massive role in your ability to get loans and credit lines. When you have a poor credit score, it can also impact your ability to get an auto loan. Fortunately, auto loans fall into the secured loan category, which means that the car you buy is the collateral for the loan. As a result, getting an auto loan with bad credit might not be as difficult as you think. Here are four things to know if you need a car loan but have bad credit:

1. Some Lenders Specialize According to Credit Score

The first thing to understand is that some lenders issue loans on a case-by-case basis, while others might specialize according to credit score. You can find lenders that offer specialize in bad credit auto loans. There are also lenders that do not offer bad credit loans at all. Instead, they might only offer loans to people with specific credit scores or higher.

If you know that you have a low score and need a car loan, you might want to check to see if a lender issues loans to people with credit scores like yours before you fill out an application. If they do, you will have a better chance of getting approved for the car loan.

2. You Might Pay a Higher Interest Rate

One thing you can expect with a bad credit auto loan is a higher interest rate. Lenders realize that people with bad credit pose a higher risk. As a result, they compensate for the added risk by charging a higher interest rate on the loans.

3. You Can Improve Your Approval Odds with a Larger Down Payment

Offering a larger down payment might be advantageous when you have bad credit and need a loan. When you offer a larger down payment, the lender's risk level drops. As a result, they might be more willing to offer you a loan.

4. Paying Off an Auto Loan Can Help You Improve Your Credit

The final thing to consider is that getting an auto loan can help you achieve a better credit score. By paying your loan payment each month, you can rebuild a positive repayment history. The result of this is an increase in your score.

If you have bad credit but want to know more about how you can get an auto loan, talk to an auto lending company that issues loans to people who have credit scores like yours today.