Posted by Jay Soriano
on Aug 28th, 2012 in Automotive
| 0 comments
Consumers, who’ve missed their debt payments, misused their credit cards and failed to pay off the payments on their credit card consolidation loan, should be suffering with poor credit histories and they’re the ones who find it difficult to obtain a car loan. People with poor credit histories are always at the receiving end in the lending industry and they have to inevitably be subject to the high rates on any kind of new loans that they take out, let alone auto loans. After all, the economy is going through a downturn and the cost of living is continuously rising and people are having fewer cash at hand which is making them drown in a sea of debt. However, this doesn’t mean that it is impossible to grab an auto loan with a tarnished credit report. You just have to jockey yourself into a better position than what you are so as to be able to obtain better rates and terms on the loan. Here are some effective ways in which you can jockey yourself in a better situation to get a loan within your means.
- Augment your credit score: Improving and augmenting your credit score is one of the wisest decisions that you can make before taking out an auto loan. Before you take out an auto loan, you should know what the credit bureaus are saying about you. If you know what your actual credit score is, you can prevent the lenders from claiming something that is actually far from reality. Simply contact any of the 3 credit reporting agencies and get a credit report and a credit score of yours in order to boost it.
- Cut back spending with your credit cards: When you choose to take out a car loan, you have to show the lenders your DTI ratio which is the ratio between your monthly income and your monthly debt payments. So, unless you restrict yourself from shopping with credit, you won’t be able to lower the DTI ratio that is necessary for grabbing a car loan within your means. Shop with cash instead of credit.
- Pay off your credit card debt: If you owe money to the credit card companies and on your utility bills, you should immediately repay them as unsecured debt not only affects your credit score but will also increase the ratio between your debts and your total income. Get help from the professional credit card consolidation options through which you can repay your entire debt level and also get back a firm grip on your finances.
- Comparison shopping: As you already have a poor credit score, very few lenders might be eager to help you with a car loan at an affordable rate as they won’t love to take the risk for themselves. Therefore you should shop around and get multiple quotes from multiple companies so that you’re able to get the best deal in the market. Check the interest rates, the repayment term of the loan and whether or not there are any kinds of pre-payment penalties on the loans.
- Get pre-approved for the loan: The last thing that you can do in order to take out a car loan within your means is to get pre-approved for the loan. Whenever you show this pre-approval document to your car loan dealer, they will probably offer you better deal on the car loan in order to bring you into their business. Show them all your income documents and check your affordability before getting pre-approved.
Therefore, getting an auto loan with a poor credit score is certainly not an impossible task, but it may be tougher than getting the same with a good credit score. During the recession, you should always make sure you get the best car loan that is within your means.
Author Bio: This article has been contributed by Billy Patterson. He is associated with Oak View Law Group as a contributory financial writer. He likes to keep updating himself regarding recent developments in finance sector. He has written many articles on debt management, debt solutions , bankruptcy etc.
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