Indiana is deemed as one of the worst states for credit. If you are one of the state’s residents with bad credit, don’t worry. You can still purchase a car through financing despite your credit situation. In fact, this is quite a good time for you to apply, as more lenders give out non-prime auto loans. However, don’t assume auto lenders will just give out financing. You should do some work to make them want to give it to you. Here are five things you can do to improve your chances of securing an auto loan despite bad credit.
Know your credit. You say you have bad credit, but do you know for sure? Before you apply, be sure about your credit situation by getting your credit reports and credit scores. Pull your reports for free from each credit bureau at AnnualCreditReport.com. You can get your Equifax and TransUnion scores for a fee at MyFICO.com. You can learn what you qualify for after you determine for certain your credit standing.
Find out your options. You can only get an auto loan if you know what your options are in terms of financing. Your instinct may be to immediately seek lenders that specialize in subprime lending, but don’t do this just yet. What you should do instead is consider all creditors, even those that you don’t think lend to individuals like you. Start with traditional lenders like banks and credit unions—it would be a good idea to inquire at those that you already do business with. You will never know which institutions are willing to lend to you unless you do some asking.
Offer a generous down payment. You are more likely to get approval even with bad credit if you put down a generous amount. This is because you reduce the amount of risk the lender assumes when it approves your loan application. With a bigger down payment, you borrow less money from the creditor. Another reason why paying a huge sum as down payment is recommended is that it presents you as a serious car buyer who is less likely to miss out on payments. The ideal down payment is 20 percent of the vehicle’s purchase price, but give more if you can. If you don’t have the money yet, start saving now!
Find a co-signer. Most auto lenders require a co-signer for loan applicants with bad credit, so try to find one before you send that application. Choose one with good to excellent credit, someone who is financially capable to repay the loan should you fail to do so. However, don’t think that the loan responsibility is shared between you and your co-signer. It is solely your responsibility, and one you should pay yourself. Don’t get the other person in trouble by not making payments.
Prepare the necessary documents. Lenders may be more willing to offer you an auto loan if you have the required documentation on hand. Your credit may not be ideal, but loan officers would certainly appreciate you making their jobs a bit easier by coming prepared. Some of the things that lenders request are bank statements, current pay slips, utility bill/s and proof of identity. Ask the lender for the list of specific requirements.