Let’s say you have a credit score of 493 but you need a new automobile. Do you have even a prayer of getting the loan you would need to buy it? Well, yes, there are places where you could get that loan, but it will come with one big caveat.
Talk to the dealer
Whether you’re buying a new or used automobile, the first thing you should do is talk to the dealer. Its number one goal is to sell you a car so it may have sources for auto loans for people like you that have bad credit ratings. For example, the company DriveTime claims it can qualify anyone for an auto loan regardless of their credit record.
Try a local credit union
Credit unions can sometimes be places where you could get an auto loan when you have bad credit. Of course, how much you could borrow will depend on how bad your credit is, how much you can put down on the car and what’s in your credit report.
Here comes the big caveat
As I wrote in the first paragraph, you should be able to get an auto loan even with a bad credit score but it will come with a big caveat – a really high interest rate. The one saving grace is that it will be a secured loan, which mitigates your lender’s risk. In other words, should you miss a payment or default on the loan, your creditor could just come and take the car. In fact, in most states a lender can repossess a car if you miss just one payment. And it doesn’t even have to notify you that it’s coming to get it. You could walk out of the house one morning and find you no longer have a car.
How badly do you really need a new car?
You should first ask yourself how badly you need a new car before you apply for a loan anywhere. If you haven’t yet discovered this, there is a big difference between “want” and “need”. You might want a new car but do you really need one badly enough to get a high interest loan that will just add to your credit problem?
Try credit counseling first
Many people with low credit scores have found a better solution is credit counseling. This is where you find a credit-counseling agency –in your town or via the Internet. It will analyze your finances, help you make a budget and develop a debt management plan (DMP) that should get you clear of debt in five years or less. In the meantime, maybe you could just keep driving your current car instead of running up more debt.