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    Is your credit less than perfect?

    You’re not alone. In fact, some estimates show that a quarter of American adults are saddled with poor credit. Yet, many of these individuals manage to get auto loans every day.

    So, how do they do it? And, more importantly, how can you do it?

    It’s not as difficult as you might think, especially if you follow a few steps and accept some realizations.

    Set Your Expectations

    While you may be able to get a car loan, you’ll likely pay more to obtain it―through higher interest rates― than someone with a better credit rating. If your credit score generally falls below 620, you’re considered to be a sub-prime borrower, which means you won’t qualify for the most attractive loan offers.

    If you have poor credit, it’s important be realistic about the cars you’re hoping for. Opting for expensive vehicles that are out of your financial league is going to make obtaining a loan that much harder.

    So, think practical. You’ll stand a better chance of getting a car loan. And, perhaps later on once your credit rating and financial situation has improved, you can land that dream car.

    Check Your Credit Report

    Once your expectations are in check, start the loan process by obtaining your credit report. Despite efforts to clean up this industry, credit-reporting agencies continue to make mistakes that often jeopardize or ruin individual credit ratings. Even minor mistakes can be enough to nudge a rating into a less desirable category.

    If your credit is substandard already, make sure it isn’t sustaining further damage through erroneous information. Take a few minutes to go through your reports, and if you spot any inaccuracies, have them corrected immediately―before you apply for a loan. Doing so can save you a lot of money and grief.

    It’s easy and quick to get your report, and an added bonus is the protection plan that comes with it.

    Know Your Credit Scores

    When you have sub-prime credit, it’s especially important to know your credit score, as it’s one of the top factors lenders consider when deciding who will be approved for a loan. And, it plays a critical role in deciding your interest rate.

    Having this knowledge allows you to proceed through the loan process with more confidence. You may even find you’re not far away from a ranking that will allow you to qualify for a lower rate. In those cases, it's better to wait (if possible) to apply for a loan until you’ve reached that threshold.

    Contact the major credit agencies to obtain your score; each will likely have a slightly different number, depending on the information they have and the methods they use to determine scores.

    Clean Up Your Act

    While being late with your debt payments―or missing them altogether―is never a smart idea, it’s especially harmful to do so in the months preceding your loan application. That’s just not the picture a lender wants to see, even one that’s comfortable dealing with individuals with inferior credit records.

    By maintaining a clean, on-time payment history for approximately a half year before applying for a loan, you’ll give the creditor more reason to lend you the money.

    Shop Around

    While plenty of financial institutions may be interested in giving you a loan despite your credit situation, you’re probably going to have to work harder to find them―and to locate the best deal for you.

    Simply relying on the dealer to obtain the financing for you is the easy way out, and will likely cost you. Sure, the dealer wants you to buy the car from them, but they’ll also seeking to make a profit through the financing. And, that usually means steeper interest rates and other charges than you'd find elsewhere.

    So, try to avoid dealer financing unless you’re convinced it’s the best you can do.

    Instead, do your homework before you go to the showroom. Know what’s available to you, and if possible, secure your financing beforehand.

    While you can search online for bad credit auto loans, don’t forget to visit local banks and credit unions. And, be sure to inquire with financial institutions you already have a relationship with, even if it’s just for a checking account. Banks tend to view current customers with flawed credit more favorably than strangers with the same background.

    Consider Refinancing

    So, let's say you manage to get the loan, but you’re not happy with the terms. Why not consider refinancing the loan a year or so later?

    There’s little harm in trying, and the process is painless. Refinancing is a viable option especially if your financial situation or your credit ratings have improved since you received the loan, or if interest rates have dropped during this period. And, a loan that’s only a single percentage point lower can save you a significant amount of money.

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