Our ongoing recession and credit crisis are tough for everyone, especially those trying to get their hands on a used car loan. Since so many people have blemishes on their credit reports, lenders used to be more forgiving of one or two items on the report. However, in tougher times, guidelines are stricter, which means it’s more difficult than ever to get a loan. Here are some problems you might run into if you make an attempt nowadays …
- Marginal credit may not be approved. In the past, if your credit was on the borderline of slipping into the subprime category – but you were not there quite yet – you could still be approved for a loan, and possibly with a higher interest rate. However, depending on who you choose to work with now, you may be completely denied for a loan.
- One or two blemishes are too many. Again, in the past you may have been approved for a loan with only a couple of slip-ups on your report, but with lenders cracking down, you may find yourself walking out of a bank or dealership empty-handed with just a few blemishes.
- Bigger down payments to think about. Another symptom of this credit crisis is having to come up with a down payment of 20 – 30% instead of 0 – 10% if you have marginal credit.
So what can you do about this?
Your first priority will be to get your credit in order. Unfortunately, once a blemish shows up on your report, it likely will not be removed for 7 or more years. But you can make every effort to pay off your debt or get caught up on your loan or credit payments to at least show that your blemishes are in good standing and you are capable of making your payments on time.
It is also extremely important to make sure that you have more than enough income to cover the used car you’re trying to purchase. If the lender can look at your income and see you have ample money to pay each month, you can increase your likelihood of being approved. And if you can come up with a sizable down payment, this can also increase your chances.
While we’re in the midst of this credit crisis, it’s going to take a lot more on your part to get approved for a used car loan. But don’t give up. With determination, you can still buy the car you want.