Mr. Raj is a data analyst for a multinational corporation. He recently purchased a used car with the help of a loan. Mr Raj’s purchase is notable in that he was able to obtain a used automobile loan despite having a bad credit score. However, just because Mr Raj took up a bad credit used automobile loan does not indicate he defaulted or skipped many EMIs on his previous loan. His credit score is low since he has never taken out a major loan and has only paid the EMI on a consumer durable loan once. So, if you, too, have a bad credit score, take a page from Mr Raj’s book and figure out how to get a used car loan with a bad credit score.
1. Put money aside for a substantial down payment.
It makes no sense to request a 90 percent LTV on a used automobile loan with a low credit score. Applying for a large loan with a bad credit score will result in high used car interest rates based on credit score, or your loan application may be denied. As a result, Mr Raj recommends making a bigger down payment. A higher down payment improves a borrower’s involvement, and lenders consider such applications to be low risk, resulting in the approval of low credit score used vehicle loans more quickly.
So, what do you have to lose? If you want to secure a used automobile loan, you should start saving now so you can make a larger down payment.
2. Include a co-signer or co-applicant.
Do you have bad credit but still want a used car loan based on your credit history? If this is the case, consider adding a co-signer. A co-signer/co-applicant is a person whose name appears alongside yours on the loan agreement and who is financially accountable if you default. As a result, Mr Raj advises that you try to persuade a member of your family with a consistent salary and good credit to co-sign a loan arrangement. Keep in mind, however, that any missed EMIs will have a negative influence on the co-credit signer’s as well. Furthermore, defaulting on such loans will have an impact on the co-ability signer’s to borrow in the future.
3. Opt for a Low-Cost Vehicle
You must have perfect credit in order to finance a luxury used car. It makes no sense to buy a luxury used car worth Rs 50 lacs on loan with a low credit score since the lender will reject your loan application. Mr Raj suggests that if you want to be the proud owner of an automobile, you should get one that fits your budget. He also suggests skipping extras like a sunroof and fancy wheels to reduce the loan amount.
Even if you have a bad credit score, if the loan amount is little, the financial institution is more likely to approve it.
4. Dealerships that allow you to buy now and pay later
Used car dealerships now provide financing for used automobile purchases. Simply visit your favourite dealer, choose a car, sign the loan agreement, and drive away in your dream four-wheeler. Isn’t that fantastic? But wait, there’s more. Mr Raj claims that such loans have a hefty interest rate. While guaranteed funding may appear appealing, high interest rates are typically connected with high default rates. Such dealership loans may have a negative impact on your credit score. As a result, you should only employ this type of used auto loan financing as a last choice.
To sum it up
While obtaining a used automobile loan with a poor credit score is difficult, it is not impossible. Apart from your credit score, you can get used automobile loan financing provided the rest of your profile is solid enough. Take advantage of the opportunity to enhance your credit score once you’ve been approved for a low credit score used automobile loan. Once your used car loan payment history improves and your credit score rises, refinancing your used car loan or obtaining any other kind of financing will become easier in the near future.