Having bad credit will impact your auto loan differently depending on who your lender is. Here are some common options for auto loans, along with details about how bad credit will affect your ability to borrow:
Dealership Financing
If you’re considering getting financing from a car dealership, you should be careful. Many car dealerships are able to work with people with bad credit, but some push you into high-interest loans when you might be able to get a better deal elsewhere.
Some dishonest dealers will even try to get you into a loan that is designed to fail since they can then repossess the car later on and charge a big fee or penalty. If you’re thinking about getting a loan via a car dealership, be sure to shop around first to make sure that what they’re offering is a good deal compared to other bad credit car loans.
A Traditional Bank
Getting an auto loan from a traditional bank if you have bad credit will likely be difficult, if not impossible. That’s because traditional banks tend to be extremely conservative when it comes to their lending decisions. They often have high cutoffs when it comes to credit scores and income, and they have little ability to be flexible. If you want to borrow from a bank, you might need to get a co-signer.
A Credit Union
Credit unions can sometimes also have high credit score cutoffs, but they tend to be lower than what traditional banks offer. They are more likely to be flexible if you’ve been a member for a long time. They also often offer lower rates than other lenders for people who have high credit since they aren’t a for-profit company, but a non-profit membership organization. Just because your current credit union won’t lend to you doesn’t mean that there aren’t other credit union auto loans available. Make sure to shop around.