Finding a Car Loan With Bad Credit

If you're lucky enough to have great credit, you don't have to worry about how you'll qualify for a new car loan at good rates. But what if your credit is less than perfect?

If your credit report displays its battle scars, and is a little tarnished around the edges, you won't be able to take advantage of the great rates advertised for "qualified buyers only" on the car commercials you see on television. The question is, does that mean you won't be able to get approval for a new car loan at all?

It doesn't have to. There are many loan companies that have been established specifically to work with this growing segment of the population. As banks tighten their lending restrictions, getting a new vehicle loan has become much more difficult for a lot of people.

Car companies have been working to be able to help these people. It's in their best interest. With new car sales at all time lows, and the auto industry experiencing significant decline, they need to get cars moving, to support increasing production, creating jobs and getting the economy moving. But if no one can afford a new car, or obtain financing for one, the cycle can't get started.

If your credit is less than stellar, can you get approved for a new car loan, even in today's economic climate? Sure you can. The difference is that you'll need to research your options a little more thoroughly to locate the non-traditional lending sourced. You might be unable to get approved through the dealership, or at your local bank, but there are still options open to you.

With some research you'll locate a host of other places that cater to lending to this group of people. The rules they use to govern loan approvals are much less strict than those your bank has to work with.

Your first step should be to obtain an updated copy of your credit report from each of the three major credit reporting agencies, or bureaus. You can request a free copy of your report once each year.

Review your report very closely, looking for any items that have a negative impact on your credit rating, and have an explanation prepared. Many of these alternative lending sources are willing to look beyond the raw numbers of your credit score, and are open to taking into account the reasons why you have had a tough financial time during that period in your past. You don't need to have a great sob story, and don't make anything up. Just be honest about your situation, and emphasize the steps you have been taking recently to improve your credit rating, and to get your finances in order.

You might be surprised at how quickly the loan approval process goes, once you find a lender that is willing to work with you and your credit history. Choose a vehicle that fits within your budget, and you could be driving that new car a lot sooner than you think.

By Jon Arnold