There is no end to a person’s desire.

People are always on the lookout for commodities that can make their lives simpler. And most of the people aren’t blessed with money, so they opt for loans.

Today, buying a car is easy because of lenders. In order to get approved for an auto loan, you need to provide them with financial information such as:

· Your income,

· FICO score,

· Current loans, etc.

Once a lender analyzes your situation, he will approve you for an auto loan. But, what if you have an extensive history of late payments and excessive debt? Then, he will consider you as a subprime car buyer.

According to the Federal Reserve Bank of New York, the total auto loan amount for the last quarter of 2015 was $ 1.1 trillion. Out of the total auto loan amount, 22% was provided to the subprime car buyers. And, with the rising delinquencies, subprime car buyers pose a threat to lenders’ investment. So, lenders charge subprime car buyers with high interest rates in order to secure the principle amount as early as possible. High interest rates put a subprime car buyer in a considerable dilemma of whether he should apply for an auto loan or not.

What should a Subprime Car Buyer do?

If you are a subprime car buyer, you must not be hasty in obtaining an auto loan. Try to improve your creditworthiness. Once you see a considerable improvement in your financial situation, apply for the loan. Here a few tips to help you improve your chances of getting an auto loan:

· Never Hurry

Lenders are unwilling to pay for your car because of your credit history. So if you hurry, they might reject your loan application. Also, there are chances that they may approve you for a small loan amount and charge a very high interest rate for it.

· Try to manage your Current Debt

Take some time to improve your creditworthiness by managing your current debt. You can pay off a few of your debts to reduce the DTI ratio.

· Restructure Your Image at Your Office

It is an indirect way of consolidating your image before the lenders. When you apply for an auto loan, they will scrutinize every detail mentioned in the loan application. If they contact your office to find out more about you, it is necessary that your employers provide them with a positive review. So, it is important to restructure your image at the office.

· Find a Decent Co-signer

Try to find a co-signer with a good credit history. It will increase the strength of your loan application. Also, it will enable you to get an auto loan quickly.

· Get Pre-Approval on Auto Loans

Getting pre-approval on auto loans can be the most beneficial thing for you. You can get your loan application assessed before visiting the dealer. It will allow you to know your financial situation clearly and help you in making a wise car buying decision.

· Try New Lenders

Always look for new lenders. They are looking for people to lend money and establish themselves in the market. But, conduct adequate research before submitting your loan application to a new lender.

· Keep a check on your Salary

Salary acts as the deciding factor for getting a loan, so keep a close watch on it. Also, work hard in order to get a raise from time to time.

· Arrange a Large Sum of Money for the Down Payment

It is seen that lenders are reluctant to offer money to subprime car buyers. It is possible that they may approve you for a low amount. So, try to arrange as much money as possible for the down payment. It will help you buy a car quickly and reduce your debt as well.

A subprime car buyer can get an auto loan. But, remember that the lenders are going to charge you with high interest rates. So, it is better to establish yourself as a decent borrower and then apply for an auto loan.

In a perfect world, we would pay cash for our cars and never have to worry about debt or monthly payments. However, it is a real world where only few can afford to buy a car with cash and rest have to apply for an auto loan. But, applying for it doesn’t have to be frustrating. By making a good decision about your car and auto loan, you will be able to enjoy similar benefits of a cash buyer.

Luckily, there’s a way to make the financial part of buying a car easier. You can get a pre-approved auto loan before you start shopping for your car. It means that the auto loan will be made available to you even before you step out of your home.

By getting a pre-approved auto loan, you will get enormous bargaining power. It gives you a negotiating power and organizes the buying process effectively. It is the closest you can come to obtaining the benefits of buying a car with cash even if you have not saved money for it. Having the financial part in place before you shop for a car makes it easier to focus on finding the right car.

Pre-Qualified v/s Pre-Approval

Both the terms may sound similar but they differ in their meaning and purposes. They are meant to be useful sources of information for potential car buyers.

· The Meaning of getting Pre-Qualified for an Auto Loan

Getting pre-qualified for an auto loan is simple. When you supply the lender with the information regarding your financial history, he will assess it and give you an idea of the amount for which you will qualify. A pre-qualified amount is the amount for which the lender might approve you in the future.

But, getting pre-qualified for an auto loan won’t make you a confident buyer. It is because the lender will not provide you with a loan and not put an end to your worry.

· The meaning of getting Pre-Approved Auto Loan

Getting a loan before you start shopping for a car means you will know the precise approved loan amount in advance. The lender will check your credit report and tell you the exact amount for which you are approved. With pre-approval on hand, you can look for a car at or below the amount specified. It will give a boost to your confidence.

Pre-approved Auto Loan: Numerous Benefits

· When you go through the process of getting pre-approved, you can buy a car whenever you want to. Compared to other car buyers, you will not have to face any credit issue at the time of buying a car.

· You will possess more leverage at the dealership lot as it will provide you with bargaining power while negotiating the price of the car. It is possible because you will be aware of your budget beforehand.

· It will give you the power to shop like a cash buyer. You will be able to enjoy benefits such as quick buying process, good negotiating power, etc.

· The presence of online lenders who specialize in offering pre-approved auto loans will help you in breaking the complexity of the process. As the process is online, the lender will be able to ensure that you get a quick solution to your query.

· It is a perfect option for buying a car. It will allow you to plan your purchase as you don’t need to feel the pressure of coming up with a large down payment.

Now that you understand that getting a pre-approved auto loan can transform you into a cash buyer, it is time to reach out to online lenders who specialize in it.

According to an article in consumers affairs;

In general, it is better to go with a bank or an auto financing lender rather than the car dealership down the street that is offering a “buy here, pay here” deal. If you do wind up with a high interest rate on your car, work on rebuilding your credit score so that you can eventually refinance.

If you suddenly find yourself without a car you might be asking, “How can I buy a car with bad credit?”, well, You DON’T! I know not having a ride can be a problem, like how do you get to work, or what if you want to go out? Well as far as getting to work goes, see if a work colleague lives near you and chip in on some gas for a ride. As far as getting out from time to time, there’s always Uber.

You want to give yourself a few months to save up some money and pay cash for a vehicle until you can get your credit to a point where you can get a 6% or less interest rate. Your choice of vehicle will be better and the total cost for the vehicle will be a lot less.

Another problem with buying a car with bad credit that most people forget is car insurance. Your insurance premiums unfortunately are also based on your credit score. The combined monthly cost of your car and insurance could be challenging. Again, waiting until you have a good credit score will save you on insurance as well.

Here is an example based on $35,000.00 vehicle purchase at 20% versus 6% on a 5-year loan.

$35,000.00 at 20% interest you will pay over $15,000.00 in interest at 6% you will pay approximately $5,000.00 in interest. Quite a difference.

Your total cost for the vehicle is about $15,000.00 less in interest at 6%, and your monthly payment is approximately $250.00 less per month!

OK let’s play a little game, what if you took that $250.00 per month that you’re NOT paying in interest and invested it each month over the same 5-year time period with a 6% return?

Well you end up EARNING $3000.00 instead of PAYING $15000.00. I’d say that’s a pretty good argument for doing everything you can to avoid a high interest car loan.

Instead, put ALL your resources into getting your credit fixed. This will put you in to position to buy at a good interest rate with minimum money down. This will save you a ton of money and you won’t regret it!

Buy a new car or even a used car is never a good investment, but one you can’t avoid. Buy a car with bad credit, as you can see, is yet a worse scenario. Make sure you do whatever it takes to avoid this costly mistake.