3 Things To Know If You Need An Auto Loan But Don't Have Great Credit
Your current car is experiencing all kinds of problems, and you're tired of putting money in it. So, you need to get a newer one to replace it but are worried you might not qualify for a loan because of your credit score. Does this sound familiar? Are you wondering if getting a loan will affect your credit even more? Are you afraid you might get turned down? If you are in this position, here are three things you should know as you prepare to get a newer vehicle.
Almost Anyone Can Get an Auto Loan
One of the best things about auto loans is that almost anyone can get one. There are so many different lenders out there that offer car loans, and many specialize in providing them to people with bad credit. If your credit is not as good as you'd like it to be, look for a lender that advertises loans for people with bad credit.
Loan Terms Vary by Credit
While you can get a loan with bad credit if you go to the right lender, loan terms vary. What this means is that you might not get the best terms for your loan due to your credit. People with excellent, perfect credit typically qualify for the lowest interest rates on vehicle loans. People with bad credit don't, though. With a low credit score, you might get an interest rate that is higher than the current going rate. Lenders charge rates based on risk, and a person with bad credit is a higher risk to them. They compensate for the added risk by charging higher rates.
Getting an Auto Loan Can Help You Build Your Credit
One essential thing to know is that getting an auto loan might help you build your credit. In fact, getting any installment loan is useful for this purpose. When you apply for the loan, the lender will run your credit. The result of this is a hard inquiry on your credit report, and this may cause a slight drop in your score.
Once you begin paying the loan off, though, you will build a positive history of payments. Each month, the payment you make will cause your score to creep up. After just one year, you might see a significant increase in your score.
To find out if you qualify for an auto loan, contact a lender of your choice and fill out an application.