Getting a bad credit auto loan can be tough, but it certainly isn't impossible. Here are a few things you can do to prepare before applying for a bad credit auto loan:
Know What Your Credit Score Is
Even if you know your credit isn't great, it is a good idea to find out what your score is so you know exactly what you are working with. Pulling your credit report will give you insight into why your credit score is the way it is so you can take the opportunity to repair your score where possible. You may find that you can pay off a couple of small bills to clean up your score a little bit so you qualify for a bigger auto loan or a lower down payment before all is said and done.
You might even be able to contact some of the lenders that have reported to the credit agencies and work out payment plans in exchange for having your credit score adjusted. At the very least, you will know exactly where you stand so you can effectively negotiate pricing and loan terms when it comes time to actually buy a new or used vehicle.
Prepare to Prove Your Reliability
If you're applying for an auto loan with bad credit, you will need to prove that you can be relied on to make your monthly payments in full and on time until your loan is paid off. Take the time to gather your tax return records, the last year's worth of payment records, and even letters of recommendation from your employer as well as trusted friends and family members.
Ask the auto dealer you are working with for things your lender will look for to ensure that you don't overlook anything important that could have a serious impact on whether or not you get approved for your loan. You should also make sure that you've saved up a sizable down payment to not only show that you're responsible and serious about your purchase, but also to lower your loan amount as much as possible so you can save some money on interest rates over time.
Understand Your Obligations
You should also understand exactly what your obligations will be once you sign your sales contract before making any actual buying commitments. Exactly when will you be expected to make your payments every month, and what kinds of penalties are you looking at if your payments are late?
Where should you be sending your payments to, and what kinds of payment types will be accepted? If you do default on your loan, will you be obligated to surrender your vehicle as repayment or will you have an opportunity to renegotiate your terms? The more you know ahead of time, the better you will be able to manage issues if they come up.