If you’ve had some credit bumps along the way and now your score is low, you may be concerned about getting approved for a car loan.
While traditional lenders may not be an option until you get your credit score up, there are some alternatives, such as buy here, pay here. Here’s a closer look at some alternatives to traditional car loans for buyers who are working on repairing their credit.
Buy Here Pay Here Loan or Lease
Buy here pay here loans and buy here pay here lease agreements are offered by car dealerships that offer in-house financing. This means that the dealership provides the financing for the cars they are selling. The benefit of these types of loans is the dealership does not do a credit check. They will verify your income and have you provide proof of residence, but they won’t look at your credit.
The bad news with these types of loans is they often come at a higher price. The interest rates are significantly higher than traditional loans, and there may be some additional fees. But, if you need a car and have bad credit, you can use a buy here pay here loan to rebuild your credit and then get into a lower-interest loan.
Find a Co-Signer
Getting a car loan is a good way to rebuild your credit, but you might need some help. If you have a friend or family member who is willing to help by co-signing your loan, you can probably get better rates. Ideally, you have someone with a steady income, a high credit score and excellent credit history. Just remember that their credit score is in your hands. If you don’t make the payments on time, their credit will suffer.
Financing Through the Dealership
If you’re having trouble finding financing through a lender, you can turn to your dealership for help. This is different from a buy here pay here loan. Dealerships have relationships with many lenders. They work as a middleman between you and the financial institutions that they have connections with and can help get you a loan. Again, these come with higher rates, but if you make your payments on time, it will help rebuild your credit. Once you have a higher score, you can either refinance or get better rates the next time you need to buy a car.
Bad Credit Auto Loans
If all else fails and you still need to buy a car, you can try bad credit auto loans. These come from companies that specifically offer loans to buyers with bad credit. It’s a typical car loan, but it comes with a high interest rate based on a few factors, including your credit score. These are sometimes referred to as subprime loans. Not every lender offers this type of loan, so it may take some research to find one, and you’ll probably want to shop around to find the best rate.
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