If you’ve been denied a car loan from traditional vendors, don’t give up just yet. You might not realize it, but many companies market loans specifically to those buyers with poor or even no credit.
So, if you need a new car and your credit score isn’t where you want or need it to be, you have options. We’ve put together the following list of lenders with a breakdown of loans offered to help you find a lender that will work with you. We’ve also given several definitions of terms you should understand before you begin shopping.
Important Loan Definitions
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The following includes standard terms you’ll come across as you shop for a loan. It’s essential that you understand their meaning, as they directly impact your loan.
Loan Term – This refers to the length of time it will take to pay off your loan. Lenders usually express these in months. Car loans can run as few as 24 months and as long as 84 months. Rarely will you see a term longer than seven years. When shopping for auto loans, especially on a new vehicle, financial experts recommend keeping the loan length as short as possible. New cars depreciate quickly, and with a longer-term, you can find yourself upside down or underwater, which means you owe more on the vehicle than it’s worth.
Soft Credit Pulls – As you shop for a loan, many companies will run a soft pull on your credit report to begin the process. A soft pull allows the lender to look at a portion of your credit report without affecting your credit score. From this, they make a pre-qualification loan offer to you. This prequalification offer doesn’t guarantee you a loan, but if the remainder of your credit falls in line with the portion the lender looked at, you likely will get approved.
Hard Credit Pulls – A hard credit inquiry pulls your entire credit report and does impact your credit score. Try and avoid a hard credit pull until you’re happy with the terms offered on a specific loan you’ve been pre-qualified for first.
Online Marketplace Lenders
Searching for a car loan can take time. By using an online marketplace, they search out loans for you. You’ll get multiple lenders making pre-qualified offers from which to choose. Below we’ve listed several for you to consider.
Autopay – You’ll get a wide range of auto loans, from traditional new car loans to used car loans and even lease buyout loans. You’ll receive offers from conventional lenders, actual dealerships, and private party loans. After pre-qualifying, you’ll get estimated rates and terms without affecting your credit score. Autopay also provides a wide range of loan amounts, from $2,500 up to $100,000. In addition, you’ll get access to additional products through Autopay, like gap insurance and service contracts. Autopay also allows co-applicants, which can help you qualify for better rates and higher loan amounts.
MyAutoLoan – With MyAutoLoan, you’ll get up to four offers in minutes after a soft credit pull prequalification. MyAutoLoan provides a wide variety of loans on new and used vehicles, refinance loans, and lease buyouts from traditional lenders and private parties. Your loan must be for a minimum of $8,000 and the car must be ten years old or newer. Terms run as high as 72 months through MyAutoLoan lenders, depending on your eligibility.
Eligibility requirements include a minimum income of $21,000, a FICO score of 575 or higher, and be 18 years of age. MyAutoLoan offers loans to those with a bankruptcy listed on their credit report, provided it was discharged or dismissed.
One-Stop Shopping Lenders
The ability to shop for a loan and a car in one place can make the process easier, which sounds very similar to a car dealership. Yet, if car dealerships have turned you down, you can still find companies online that will find you a loan and a car in one place.
Carvana – At Carvana, you get access to their inventory of cars where you can pick up your vehicle once you receive loan approval through their network of vending machines. You can easily pre-qualify with a soft credit pull and begin shopping online. Carvana’s prequalification expires in 45 days, while other lenders’ pre-qualifying offers expire in 30 days, giving you additional time to shop.
Carvana’s eligibility requirements include a $4,000 minimum annual income, which helps many low-income buyers get a loan. Carvana won’t write a loan to those with an active bankruptcy or allow co-applicants. You only have one loan type through Carvana, and you must purchase a vehicle from their inventory. If you don’t like the terms of the loan or the types of cars they have in their vending machines, you should look elsewhere.
Vroom – Another online retailer, Vroom, provides you with a loan and a vehicle in one online visit. Vroom doesn’t have vending machines where you pick up your car. Instead, they will deliver your vehicle to you with a modest delivery charge. They offer multiple loan types and from various lenders. You can trade in your old car as well, providing you more buying power.
The Truth About Bad Credit Loans
Millions of buyers may avail of car loans if they don’t want to cash out for a vehicle outright. If you have good credit, you will qualify for a lower interest rate. As your credit score gets lower, however, your interest rate increases. You may also find fewer lenders willing to write loans to buyers with bad credit because of the higher risk.
Experts recommend improving your credit before applying for a car loan, but it can take anywhere from one to six months to see significant improvement. If you must buy a car sooner, be prepared to pay a higher interest rate. Higher rates raise your monthly payments. Extending the loan term will offset this and lower your monthly payment, but you run the genuine risk of going upside down on your loan. If you extend the length, be sure to cover yourself with gap insurance and a vehicle service plan.
At Rydell Outlet Center, we understand the challenge you face in buying a car with bad credit. That’s why we have programs in place specifically designed for those with poor credit or no credit. We also have an expansive inventory of vehicles to fit any budget and lifestyle. Go ahead and get pre-qualified online and begin your search knowing with confidence what you can afford while you shop our selection of quality cars, trucks, and SUVs.
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