Los Angeles is located in the state considered as one of the worst in credit, and yet getting an auto loan is not a problem here. If you are in need of a new car and you have blemished credit, getting financing at this time wouldn’t be as challenging as it used to be. In fact, now is the best time to get an auto loan with bad credit. More creditors—traditional and otherwise—have loosened their lending standards and are granting auto loans to borrowers that fall in the subprime category.
Subprime Auto Lending – The New Normal
Gone are the days when having a credit score less than 500 made one ineligible for an auto loan. Times have changed and for the better, specifically for individuals with imperfect credit. Lenders are now more lenient with credit requirements, and often a good job is all that is needed to secure the loan.
Even banking institutions embrace the subprime lending trend. Driven by stiff competition and encouraged by the low rate of loan delinquencies, many banks now accommodate borrowers who usually don’t qualify for auto financing from them. Hence, if your credit standing didn’t make you eligible for an auto loan in the past, it will no longer be the hindrance it once was.
Getting Financed – How to Get Started
Now that you know you can get auto loan approval despite bad credit, you should start shopping around. Before you seek lenders though, don’t forget to check your credit. Get your free credit report from each credit bureau from AnnualCreditReport.com, then head on over to MyFICO.com and pay for your credit scores. It is crucial to know for certain that your credit is indeed bad before you apply for a bad credit auto loan.
Searching for a Bad Credit Auto Loan
Once you know your credit situation, you can proceed with the search for the auto loan. Begin your search at lending institutions that you have business with. Just because you have bad credit doesn’t mean you should start applying at creditors that specialize in subprime lending. Apply first at the bank or credit union where you have an account. You may also consider applying for auto financing at your insurance company or employer if they offer this.
To boost your chances of getting approved, prepare a significant sum for a down payment and find a co-signer, specifically one with good or excellent credit. You will get approved faster if you have both. A hefty deposit, preferably 20 percent or more of the purchase price, presents you as a serious car buyer. As for the co-signer, this individual lessens your credit risk because he or she will share the loan responsibility.
Having both a sizable down payment and a co-signer can help you reduce your interest rate. Know that even in a less strict lending environment, borrowing with bad credit comes with higher interest.
Reminder to Bad Credit Borrowers
Seize the opportunity not only to borrow for an auto purchase but also to rebuild your credit. Repaying an auto loan is a good way to repair your credit, so make payments on time. Choose a dealer that reports your repayment to the credit agencies; otherwise, all your efforts to fix your credit through auto loan repayment will be for naught.