How to Save Money on Bad Credit Car Loans

Just because you have a low credit score does not mean

These tips will help you save money on your next bad credit car loan

that you cannot get a car loan at an affordable rate. A Subprime car loan or a bad credit car loan is meant for car buyers with a poor credit history and a low credit score. Subprime car loans are in the ascendancy in the US, and represented as much as 20% of all new-vehicle financing in the country in 2010.
Here, we tell you how you can save money on a bad credit car loan.

Know Your Credit Score and Study the Credit Report

Your credit worthiness will determine the car financing interest rate. Someone with a higher credit will get a better car loan. While your credit score tells how creditworthy you are currently, your credit report gives your complete credit history. That’s why it is very important to know your credit score, and to study the credit report before approaching a dealer. It is possible that your credit score is better than what you think it is – so knowing what it is may help you negotiate better.
Not all of the information in the credit report is correct, because this is based on what creditors report to credit bureaus. As a consumer you have the right to dispute what’s in your credit report. Study it closely and challenge anything that seems to be wrong. Any improvement in the credit score will help lower the interest on your bad credit car loan. You can get both the credit score and credit report together, on a number of online sites for a small fee.

Find Out Why You are a Credit Risk

Most people who apply for a subprime car loan have problems with debt management. They may have accounts in collection, may have applied for bankruptcy or may have had their home or car repossessed. It is important that you should review your credit report and find out if you can get any of the negative points in it fixed at the earliest.
For instance, if you only need to pay a small amount to a debt collection agency, you should do so at the earliest opportunity, before you apply for a bad credit car loan. What is really important is to give the impression to the lender that you are trying your best to pay off the loan. This would help improve your credit profile by a considerable extent.

Don’t Reveal How Much You Can Afford Per Month to the Dealer

It would be a mistake to buy a car based on the amount of monthly payment. While you should have a good idea of how much you can afford each month, providing the dealer with this information will only mean losing your chances of negotiating for a lower purchase price. This only tells the dealer how much room is left to add other costs such as add-ons and a higher interest rate. It is very important that you should buy the car based on the purchase price and not as a monthly payment buyer.

Live Within Your Means

One of the mistakes car buyers make is to roll negative equity forward. This means, they owe more on the car than what it’s worth – which is described being “upside down” on the car. It is very important not to fold the negative equity in the new car financing; this would only increase the purchase price of the new car, and cause you to be even more upside down the next time. You should NOT spend more on a car than what you can really afford to.

Make a Big Down Payment

Making a huge down payment would help get approved for the car loan faster, and get you an excellent rate on your car loan. Ideally you should make a down payment of 20%, whether by cash or by an equity trade-in. Higher the down payment, better the chances of getting approved, as this means that your lender will look at you favorably. Most of your down payment should be by cash.

Get Your Documentation Together in One Place

Doing something as simple as getting all the necessary documentation together and in order will get win the lender’s approval. This makes the lender’s job so much easier, saves a lot of time and ensures that you get the loan much faster.
You should be very honest while submitting the documents and be upfront. Remember – the lender will be sure to do a due diligence and verify everything and any discrepancy in the documentation will hurt you badly later.

Among the essential documents you should have are:

• Your Driver’s license.
• The latest utility bill.
• Any recent pay stub.

Just Say No to Add-Ons

Don’t allow the add-ons offered by dealerships to be folded into the car loan. Many car dealerships add on things such as an extended warranty with the purchase. You can always get these things at a lower price later from external sources; you don’t really have to get them from the dealership.
So that’s how to save money on a bad credit car loan. Hope the information given here is useful to you.