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People with low credit scores often get stuck in catch-22 situations, especially if they live in rural or suburban areas. They need cars to get to work. They need work to pay the bills so their credit scores go up. They need cars to get to work. Unfortunately, though, most traditional lenders are unwilling to offer financing so that workers with bad credit can start the process of breaking the cycle.

The good news is that there are alternatives to banks and other major financial services when it comes to finding loans. This article will offer some insight into how to get an auto loan even with a low credit score.

Find the Right Lender

Some buyers use personal loans to finance the purchase of cars, which may be a reasonable option for used vehicles that don’t cost very much. However, lenders that specialize in working directly with borrowers who have poor credit scores can be predatory. Borrowers who take this approach will need to perform their due diligence to make sure the lender is not just legitimate but also known for offering reasonable terms.

There’s a second option available to some consumers, and it’s to seek a loan from the dealer when purchasing a car. While most new car dealerships won’t take on the risks associated with offering to finance purchases for borrowers with low credit scores, there are plenty of used car dealerships that don’t even check credit scores. Many works with larger third-party finance companies like Consumer Portfolio Services so that they can offer more competitive rates.

Be Prepared to Show Some Proof

Even car lots that offer to finance vehicle purchases with no credit check aren’t generally going to give a loan to literally anyone who walks through the door. Other factors related to the buyer’s financial history may also come into play, so be prepared to discuss or show proof of:

  1. Sources of income
  2. Payment histories
  3. Debt-to-income ratios

In some cases, it can pay for a borrower to allow access to their credit history, even if their score isn’t anything to write home about. Factors such as credit utilization and whether the borrower has repaid previous auto loans on time can play a large role in determining whether the lender will feel comfortable offering a loan.

Look For More Affordable Vehicles

There are two additional ways to improve the likelihood of getting a loan approved, both of which involve finding more affordable vehicles. First, look for a car that is affordable enough to keep the payment-to-income ratio, which is a ratio of the combined cost of both car payments and insurance to the borrower’s gross monthly income, at under 20 percent. Second, think about offering a larger down payment. It can make lenders feel more confident that the borrower is committed to paying off the car loan.

Stay On Top of Payments

After finding a way to finance a car purchase, the most important thing is to stay on top of payments. Missing payments won’t just wind up getting the driver’s car repossessed. It will also continue the negative cycle of unmet financial obligations and make it even harder to get a loan the next time it comes up.

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