Poor Credit Car Loans Richmond, VA
It's common for folks to hit a rough patch of life and damage their credit trying to survive. Whether you lost your job, or the economy just stalled, it happens to everyone, and there is no need to worry. If you have a low credit score, you may be concerned that you won't get approved for a car loan. There are many options to help you get an auto loan, even if your credit is less than perfect. The information below walks you through the process of getting a car loan with bad credit, including how to prepare and how a car loan impacts your credit.
Know Your credit Score and Report
The first step in getting an auto loan is to know your credit score. The two most used scoring models, FICO and VantageScore, have a score range from 300 to 850. A general rule of thumb is that any score of 599 or below is considered poor and will require a few more steps to get approved for the loan. This is why knowing your basic credit report and score will give you an idea of the types of loan offers to expect. Once you have your credit report, look for ways to improve the information lenders will use to decide if you qualify and at what rate.
Show That You Can Afford the Payments
Lenders look at you as a higher risk when you have a lower credit score. So, make it easy for them to see that you can afford the loan payments. For example, a lender will look to see if you have taken out auto loans previously and repaid them on time. If so, that is a substantially positive factor in your favor. Lenders will most likely look at things such as proof of income, debt-to-income ratio, Credit utilization, and payment history. Debt-to-income ratio is your monthly debt obligations divided by your gross pay. Lenders like to see a DTI under 45%. Credit utilization is the amount of credit you have available. Lenders typically want to see borrowers using less than 30% of their available credit.
Reduce Your Loan Amount
When applying for a loan with less than perfect credit, the banks consider their potential loss if you stop making payments or total the vehicle. Think about it like this, if you take out a loan on a $60,000 truck and stop making the payments, the bank is now our $60,000, but if you take a loan out for, say, $20,000, you are considered less of a risk. Some good ways to reduce the amount you borrow with a down payment, trading in an older car, or buying a less expensive used vehicle.
Pearson Mazda Is Here to Help
Sometimes circumstances happen, and you make decisions that can damage your credit history. For example, loss of job, vehicle stops running, or medical bills that leave you short. No matter your credit situation Pearson Mazda is here to help. We have a full range of lenders waiting to service our customer's credit needs, so we can find the best financing to fit your needs. Our network of lenders can help you rebuild and have the reliable transportation you need to get back on the road. The Pearson Mazda Promise is to always find you the right financing to meet your needs and never obligate you to more than you can afford.
