Securing Auto Loans With Bad Credit: Making Car Purchasing Simpler

Once upon a time, a car was a luxury item that only the wealthy could afford. But for the last number of decades, a car has been a necessity of modern living. What has changed in recent years, however, is the challenge in securing an auto loan with bad credit ratings hanging over our heads.As with every other type of loan, getting approval with poor credit scores is not easy. There are criteria to meet at the best of times, and when low credit ratings are mixed into the equation, those criteria become even stricter. Lenders, after all, want to protect themselves against the risk of defaults.But there are options available to even bad credit borrowers, with the fear that any auto loan for such applicants cannot be affordable somewhat wide of the mark. Affordability does not need to be an issue, and with certain conditions satisfied, a competitive loan can be secured.Key Issues To ConsiderSo what are the conditions that need to be satisfied? Well, there are three main issues to consider before anyone should submit their application for an auto loan with bad credit. These are calculating a strict budget, improving your credit score and considering making a down payment.When it comes to applying for any loan, knowing what is affordable is essential. That is why setting a budget is hugely important. To set an accurate budget, calculate your total monthly outgoings - taking into account household bills, loan repayments and typical expenses - and take the figure from your monthly income.But remember that securing approval with poor credit scores is conditional on satisfying the debt-to-income ratio, which states no more than 40% of available income can be committed to repayments on a new loan. Therefore, the payments on the auto loan must fit within that limit.Improving Your Credit ScoreWhen seeking an auto loan with bad credit, the likelihood of securing poor terms is pretty high. However the terms can be improved upon by simply improving your credit score. This basically means clearing some of your outstanding debt.The best way to do this is to take out a loan to clear all debts completely in one go. This might not seem viable when a car loan of only $10,000 or $15,000 is required. But the chances of getting approval with poor credit scores can be increased even by taking on a consolidation loan.The reason is that the repayments on a consolidation loan should be much less than what the combined repayments were on the original debts. And with every debt paid off, the credit score is adjusted upwards. So, when applying for an auto loan, the interest rate is lower, and there is more excess income to cover repayments.Considering Down PaymentsThe third issue to consider when applying for an auto loan with bad credit is whether or not to make a down payment.  It is important to know that a down payment is never obligatory, though some car dealers will claim that it is. Choosing whether to make one is up to the buyer only.The advantage in making one, of course, is that the size of the required auto loan is lowered considerably. If a car is priced at $15,000, and a 10% down payment is made, then the loan needed is $13,500. This can be a major help when seeking to get approval with poor credit scores.But remember that having a lump sum to hand is required to make a down payment, so it may be worthwhile getting a loan for the full amount – if that is possible.