How to Lower Your Interest Rate on Bad Credit Car Finance

If you’re dealing with bad credit, it can be difficult to get affordable car financing. There are certain strategies you can use to cut the burden of high interest rates. 

Improve Your Credit Before Applying

One of the best ways to get better loan terms is to boost your credit score. Start off by scrutinizing your credit report and checking for any mistakes or inaccuracies. We can address such discrepancies immediately. Also, pay off your outstanding debts so you can reduce your debt to income ratio.

Consistent Payments Make a Difference

Lenders value consistency. Pay all bills such as utilities and credit cards on time. Punctual payments over a few months can show that you’ve become a more financially reliable person, and that gets you potentially better loan offers.

Offer a Larger Down Payment

Lenders are less afraid to lend if you give them a large upfront payment. Also, the more you put down, the less you have to borrow, thus decreasing the lender’s risk and/or 'interest rates' might be lower. Not only will you save money on interest over time, but you’ll also increase your chances of approval.

Use a Cosigner for Better Terms

If your credit history would make it difficult to secure favorable rates, consider asking someone with good credit to cosign your loan. The lender is assured that this individual is going to guarantee the loan.

Choose Your Cosigner Wisely

A cosigner should be someone you trust and who trusts you in return. Be transparent about the responsibility they’re undertaking, as their credit will also be impacted if payments are missed. A cosigner is someone that you trust and that trusts you in turn. They must be aware about the responsibility they’re taking on as if they miss payments, their credit will be impacted as well.

Shop Around for Lenders

Not all financial institutions are the same, and not all offer the same terms. Look into various lenders including banks, credit unions and online financing platforms. There are some who focus on helping people with less than perfect credit, with good rates and flexible repayment options.

Compare Offers Carefully

Don’t just look at the interest rate when you’re reviewing loan offers. The deal must resonate with your financial set up so you need to go through all the terms, such as fees, repayment schedules and penalties.

Negotiate Loan Terms

Loan terms aren’t carved in stone. You’ll need to negotiate with lenders to get the better deal. Stable income, recent improvements to your credit, or a reliable cosigner can increase your strength.

Refinancing as a Future Option

If you can’t get a low rate the first time around, refinancing later could be an option. So as your credit score improves and you show a history of on time payments, down the line you may be able to get a better interest rate. Don’t consider refinancing until your credit score has improved greatly. A well timed refinance can dramatically decrease your financial burden.

Final Remarks

Getting a lower interest rate on bad credit car finance requires a bit of preparation, a bit of strategy and a lot of persistence. If you’re looking to buy a car, these steps can help secure affordable car financing by offering a bigger down payment or offering a cosigner or improving your credit. If you take proactive measures, you won’t only save money, but you’ll also lay a stronger foundation for the future.