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Financing A Car With Wrecked Credit

Trying to finance a car with credit issues? It can be tough, and you are probably hitting brick wall after brick wall. Financing a vehicle without an adequate credit profile can be an exceedingly difficult thing but, believe it or not, it can be done. Nearly anyone can get approved for an auto loan if they know where to turn.

So, if you have bad credit but still need a car, let’s look at a few ways that you can get back on the road again.

Shop A “Buy Here Pay Here” Dealer

If a traditional dealer will not approve you for an auto loan, a “Buy Here Pay Here” dealer likely will.

These dealers are used to working with bad credit, in fact, they work almost exclusively with bad credit. Dealers will often approve you if you have a verifiable source of income and a down payment. They can usually get you out on the road the same day.

The negative with a “Buy Here Pay Here” dealer is that you will be limited in vehicle selection. Even the larger lots, like the one above, can only stock so many cars. In addition, you have bad credit, and they know it. That means that you will likely pay high interest and an inflated price on the vehicle. And, because they know you have few options, your negotiating power is greatly diminished.

Consider Alternative Online Lenders

If the “Buy Here Pay Here” dealer is not an option, an alternative lender might be the next place you turn. Big dealers mainly work with large banks and credit unions. They ignore the huge pool of internet-based lenders. As evident at, there are websites that can get you in touch with these online lenders and one of them may be willing to work with you. The advantage to online lending is that you will have access to lenders that are willing to work with poor credit.

In addition, most of these lenders will deposit funds directly into your account. That will allow you to buy your vehicle from a private seller, saving thousands of dollars on dealer markup. It also allows you to buy any vehicle you want since you will not be limited by dealer stock.

The downside of course is the cost. With bad credit, fees and interest will most likely be stiff. If approved for an online loan, be sure to understand all the costs before you accept the money.

Get A Cosigner For Your Loan

Getting someone to cosign a loan for you is a sure-fire way to get approval. What you are basically doing is using someone else’s good credit to get approval. The cosigner agrees to be financially responsible for the debt and this gives a lender someone else to turn to if you default on your obligation.

Do keep in mind that cosigning a loan is a serious matter. If you fail to make your auto payments, the lender can and will turn to the cosigner for the debt. If they do not pay it, the lender can put a negative mark on their credit and can even sue them for the money.

Because of the huge downside to cosigning a loan, this is not generally something that you would ask a friend to do. In most cases, a cosigner will be a parent helping a child with no credit.

Save Up More Money

Lenders approve loans based on risk. The more money that you put down, the less risky your loan is for a lender.

If you defaulted on a loan, the lender would have to seize your vehicle and sell it to get their money back. Because of the costs associated with repossession, auction fees, and depreciation they would be unlikely to get back all their money early on in the loan. That makes it risky unless the buyer puts down a significant cash deposit.

But how much cash? If you are struggling with bad credit, 20 percent will likely be the starting number. This is how much the typical vehicle will depreciate in the first year.

Look For The Right Vehicle

Sometimes the problem might not be you, it might be the vehicle that you are looking for.

The biggest example of this is someone that is looking to finance too expensive of a vehicle. One of the things that lenders look at is your debt-to-income ratio. If the ratio gets too high, your loan will get denied. Perhaps you are shopping for $20,000 vehicles when you should be shopping for $10,000 ones.

Another example is shopping for the wrong make or model of car. Some vehicles are riskier for lenders. Vehicles that hold their value better and that are known for reliability have the advantage here. This is because you are far more likely to keep making your payments if your vehicle is still worth money and still running.

Work On Your Credit Profile

Finally, why not work on your credit profile and wait a few months. You might be surprised at what you can accomplish at that time.

If you are dealing with no credit, get yourself a gas card or department store card. Use it a few times and then pay it off. Within a few months, you will likely see an increase in your credit score. It might not be much, but you may only be 10 or 20 points shy of the score that you need.

For those of you with bad credit, pull your report and see what is doing the damage. Dispute any incorrect information and give the credit bureaus time to work it out. They have 30 days to investigate disputes. Also, get a secured credit card for $500, you might be amazed at how much of a positive impact one of these cards can have.