Tips for Getting Approved for a Used Car Loan with Bad Credit

The city of Hawthorne, California is nestled in sprawling Los Angeles County, so having access to a reliable vehicle makes it easier to get around. Even if you have poor or no credit, you can still get a quality used car when you visit the helpful team at Hawthorne Auto Square. We’ll show you ways to improve your chances of getting approved, how to prep for the loan application process, and help you drive away in a new-to-you vehicle today.

Understanding Your Credit Situation

Before you start shopping for used cars, it’s important to understand your unique credit situation. By knowing where your credit stands, you can prepare for the loan application process. Here’s how to understand your credit situation before you apply for used car loans for bad credit.

• Get a copy of your credit report for free. This report gives you a detailed view of your most recent credit history, allowing you to make corrections if you find any errors.
• Consider paying down any debt you have including credit cards and student loans. The sooner you pay off your debt, the sooner your credit score will increase.
• Leave any lines of credit you already have open. This shows the credit reporting bureaus that you’re responsible for the amount of credit you do have.
• If you have no credit, start building it by applying for a credit card and paying the balance in full every month. 

Improving Your Loan Application

In-house financing is a great way for people with a low credit score to obtain financing for a vehicle. Unlike traditional car loans that some buyers obtain from banks or credit unions, you can get approved even if you have a poor credit history or no credit. However, you’ll get better loan terms and lower interest rates if you take action to improve your loan application status in advance.

Follow these tips to increase your odds of getting approved:

• Keep a close eye on your credit score and report. Consider enrolling in a free credit monitoring service to detect and prevent possible fraud or other issues ahead of time.
• Make it harder for someone else to get credit in your name by putting a temporary security freeze on your credit. You can still check your report, apply for jobs, and get insurance.
• Improve your debt-to-income ratio, which is the percentage of debt you have compared to your income. The lower this number is, the better the odds are your car loan will be approved.
• Don’t apply for new credit until your auto loan is approved and you have the keys to your new car in your hand.
• If you already own a car, consider trading it in with the dealership to help pay for a down payment. The larger your down payment is, the lower your final loan amount and monthly payments will be.
• Keep up with all of your other payments including your rent or mortgage, student loans, credit cards, and personal loans to maintain a strong repayment history.
• Be willing to purchase a reasonably affordable used car that costs less to help keep your monthly payments low.

Try to negotiate the terms of your subprime auto loan with the buy here pay here dealership to get the best rate possible.

Exploring Alternative Financing Options

Beyond in-house financing, Hawthorne Auto Square also offers other alternative financing options available near South Gate. Some of our customers have chosen to get a cosigner — someone with good credit willing to repay the loan if you can’t. Most people turn to a close friend or family member if they need a trusted cosigner.

You can also try to get a personal loan from your bank or other lender. This type of loan gives you the money upfront to buy a vehicle outright, but you’ll be responsible for repaying it directly to the lender. Other alternative options include taking a loan from your 401(k), getting a home equity loan/line of credit, or saving enough money to pay for the car in cash.

Preparing for the Loan Application Process

Before you begin the auto loan application process, follow these tips to help you prepare:

• Develop a budget and decide how much money you’re willing and able to pay for a vehicle. Include how much money you can afford to pay each month once you get approved for the loan.
• Explore various options for car financing including personal loans, direct in-house financing from the dealership, and car loans from a bank or credit union to decide which one is best for you.
• Get a copy of your credit score and credit report. If there are errors, correct them before you apply for a loan.
• Gather all of the necessary documentation including your driver’s license and any proof of income required (paystubs, disability information, SSI paperwork, etc.).
• Take your time when filling out the loan application, and look it over for errors before you submit it.

Tips for Maintaining Good Credit After Approval

So, you’re approved for a car loan. Congratulations! Follow these tips to help maintain good credit after you’ve been approved.

• Make your loan payments on time every month. If you miss a payment on an in-house financing loan, you may have to pay a fee and the late payment might go on your credit report. 
• If possible, pay more than the minimum amount due whenever you can. This will help you pay off the loan faster.
• As your credit improves, consider refinancing your loan to get a lower rate and lower payments.
• Keep your credit utilization low, and limit spending on credit cards.
• Avoid taking out more loans for other things unless you absolutely need to.

Contact Hawthorne Auto Square Today

If you’re looking for a quality used vehicle with low mileage, Hawthorne Auto Square can help. We’re proud to serve our customers in Hawthorne, and other nearby areas with in-house financing, vehicle trade-ins, and more! Contact us or stop by our dealership for a visit today.

Frequently Asked Questions

What are the income requirements for in-house financing?

Hawthorne Auto Square accepts all forms of income including check stubs, SSI, retirement benefits, disability, VA, and other government benefits. We also have finance programs available for those who get paid in cash.

How does in-house financing affect my credit score?

In-house financing may improve your credit score over time if the dealership reports your payments to the credit bureaus.