I have a car lease expiring and my credit rating is in the 400's. I don't want to lose my car, can I get a car loan for a car lease with poor credit?
Having a bad credit history and low FICO score often creates problems when buying or leasing a car. People with serious credit problems frequently have very frustrating experiences when looking for car loans and leases.
You may be able to purchase a vehicle, but you should expect to pay a premium in interest due to your low credit score. Generally, people with "sub-prime" credit should expect to pay higher interest rates, be required to make higher down payments, or make a security deposit (for leasing). They may even have problems getting auto insurance. It is best to repair your credit report by correcting mistakes and improving your on-time payment history.
Luckily for people who find themselves in your position, some auto dealers, especially used car dealers, specialize in securing financing for consumers faced with credit problems (frequently called "buy-here, pay-here" models). However, you should be careful when shopping with a used car dealership, as some of these businesses overcharge for their vehicles and sell vehicles that are in poor mechanical condition or overcharge you for the loan (since they know that they have you in a precarious position with limited options).
If you see a vehicle that you like, you should know the retail cost of the vehicle, which you can find by visiting the Kelly Blue Book Web site. You should also find out whether or not the used vehicle you are interested in purchasing has not been involved in a major accident, suffered flood damage, or been declared a lemon under your state's Lemon Law. You can obtain all of this information by purchasing a $25 used vehicle history report from Carfax. I highly encourage that you do this as it is important that you know the history of the vehicle you are planning to purchase. Many dealerships will provide you with a free Carfax report and Blue Book pricing information if you express interest in purchasing one of their used vehicles. If a dealership is unable or unwilling to provide you with Blue Book and Carfax information, you should write down the make, model, mileage, and VIN number of the vehicle and use that information to obtain vehicle value and history information by visiting the websites I mentioned above.
As I mentioned, there are many dealerships, especially used vehicle dealerships, that specialize in financing vehicles to people with credit problems, though you will likely pay a higher interest rate than the 9% to 10% national average. In fact, with your low credit score, you should probably expect to pay 12% to 15% or more in annual interest, meaning that you will pay much more in interest over the life of your loan than the average consumer. You may want to consider ways to obtain a loan with a lower interest rate, which would save you a lot of money. For example, if you do not need the vehicle immediately, I encourage you to work on improving your credit score for a year or two in an attempt to improve your score before buying a car. You could start by reviewing your credit reports carefully to make sure no inaccurate negative listings are appearing. See the Federal Trade Commission document FTC Facts for Consumers: How to Dispute Credit Report Errors for more information.
You can obtain a free copy of your credit report from each of the three major credit bureaus by visiting AnnualCreditReport.com.
Once you have resolved any inaccuracies on your credit report, I encourage you to work to repay any outstanding debts that are negatively affecting your credit score.
Most times, the best way to improve your credit profile and credit worthiness is by getting debt free! Very quickly, if you want a free debt consultation with one of Bill's approved debt help partners.
Then, to rebuild your credit, you can also look into obtaining a revolving credit account, such as a gas card, which is a good way to create a positive item on your credit report. These cards report timely payments to the credit bureaus allowing you to use them as a tool to build your credit. If you need the vehicle immediately, not allowing you time to rebuild your credit, you may want to have someone with a better credit score, say a parent, spouse, friend or relative, co-sign the auto loan with you. If you can find a co-signor with a good credit score, you should be able to obtain a much better interest rate than you would be able to obtain on your own. Discuss the possibility of a co-signor and how it would affect your interest rate with the dealership.
If you need the vehicle immediately and cannot find a co-signor, you may be forced to purchase a vehicle at a high interest rate. Luckily, your payments on your new auto loan, along with other efforts to rebuild your credit, should improve your credit score in a relatively short period of time. Once your credit score has improved, you may be able to refinance your auto loan at a lower interest rate, which could lower your payments and the total amount you will pay in interest over the life of the loan. You can learn more about auto refinance loans by visiting the Bills.com Auto Refinance Loans page.
I wish you the best of luck in finding an auto loan that fits your needs. To learn more about purchasing a vehicle, I invite you to visit the Bills.com Auto Loan Information and Savings page.
In addition, if you enter your contact information in the Bills.com Savings Center at the top of the page, we can have several pre-screened auto lenders contact you to discuss the options available to you. I hope this information helps you Find. Learn & Save.