Tips for Getting A Bad Credit Car Loan

Are you trying to get a car loan after a foreclosure or other similar financial disaster? You are not alone. With the recent introduction of the CARS program by the U.S. government, many people with bad credit histories are trying to figure out how to get a reasonble auto loan in order to take advantage of the government rebate program. Certainly trading in a clunker for a newer model vehicle with better gas mileage, less required maintenance, and better emissions will save money in the long run as well as be more enviromentally friendly. The problem that you will most likely run into, however, is getting a car loan for people with bad credit.

Foreclosure is just one of the many reasons why you might have bad credit at this time. Obviously unemployment rates are at a high point that is causing many people to lose their once stable earnings and default on loans that were otherwise made in good faith. Chances are that most people made these loans long before the incentives that are available today to protect against job loss during the term of the loan. Whatever the reasons for your current credit situation, before beginning to shop for a vehicle under the CARS program, you should first get a hold of your credit score and credit report. All three of the major credit organizations are required by law to provide you with this information free of charge at a minimum of once every twelve months. Once you have your credit information, understand what your score means and take the time to contest any mistakes that may be included on your credit report. Cleaning up the credit history on your report may even raise your score enough that you won't need a bad credit car loan.

Once you have cleaned up your credit report, if your overall credit rating is below around 620-650 (banks differ on which number they prefer) then you will fall into what is termed a sub-prime borrower - or a person with bad credit. While this is not the optimal position to be in when purchasing a new vehicle, in most cases you will still be able to secure a car loan. If you fall into this category, make sure to shop around for a lender and only apply to one lender at a time. You will find the best rates available from financial institutions rather than from the dealers themselves.

Once you do have an offer, or several to compare, take a look at what you will save under the CARS program and evaluate whether its worth it for you to take advantage now of the government rebate program or if it would make more sense to save that money instead to purchase a new vehicle in the future with cash. If you are still paying on a previous car loan, remember to roll over that balance into the new car loan or you will be paying two separate car payments while only owning one vehicle - and because the collateral on a car loan is the car itself, you may not be able to trade in the vehicle as required by the CARS Act unless you roll over that balance.