Getting an Auto Loan in a Tough Economy
Easy tips to help you get an auto loan when times are toughDuring a credit crunch, you may think it's next to impossible to get an auto loan. While the guidelines for financing a car are more stringent during tough economic times, the reality is that many car buyers can and do qualify for auto loans when times are tight. In this section, we offer tips to help you get an auto loan even when you think you can't.
Improve your creditThe best plan of attack when it comes to qualifying for an auto loan is to improve your credit score. While this process doesn't happen overnight, even small and immediate steps can go a long way in improving your credit ranking. First, make payments on time whenever you can since even just a few months of timely payments can make a difference in your score. Next, review your credit report carefully and clear up any past discrepancies with creditors that might be listed on your report. What's more, don't close credit accounts that you haven't used in a while since the more credit you have at your access, the more money a lender will be willing to give you. Finally, if you can swing it, pay off — or pay down — credit cards with higher balances whenever possible.
Consider less expensive vehiclesCar buyers with less than perfect credit should consider less expensive new cars, or used or certified pre-owned cars as an alternative. By considering a less expensive new vehicle, you may qualify for more attractive financing rates. Additionally, you could also qualify for more attractive financing rates on used cars at the dealership level. If you really want a particular car, however, don't assume you won't qualify for financing. Even with all the negative press, there are still many lenders willing to finance a car when times are tough.
Make a larger down paymentThe unfortunate reality is that almost every car buyer will feel the pinch of higher interest rates and shorter loan terms when the economy is bad. As a result, it's always a best bet to make the largest down payment you can afford. Not only will you reduce the amount of money you need to borrow (making your monthly car payments more affordable) you may qualify for better interest rates since the larger the down payment, the more serious you are as a borrower in the eyes of a lender — a borrower who has the financial means to make a sizeable upfront payment, someone who is willing to make a larger financial commitment to reduce the amount of money borrowed, and finally, someone who is committed to repaying the loan over its lifetime.
Shop for credit like you shop for a carThere are a variety of sources you can turn to when it comes to obtaining an auto loan, even in the midst of a financial crisis. That's why it's important to devote as much time to shopping for credit as you do to shopping for a car. First, use LendingTree to compare auto loan rates and terms from multiple lenders. If you're unable to qualify directly, you can leverage the relationships dealers have with dozens of lending sources to find rates and terms that are right for you, from a financial institution willing to lend you money. And even though you may think you can't qualify for financing through the manufacturer, think again. While some raise the bar when it comes to qualifying for an auto loan in tough times, others don't. Finally, many banks are still willing to loan money, especially your local bank with which you already have a relationship.
Get pre-approved today!