Acquiring a car loan can be more complicated if you have bad credit. This is because many lending companies strictly require good to excellent credit. Furthermore, you may find that the lowest rates are reserved for those with above average credit.

Hence, if your credit score needs improvement, you may need to take extra steps to improve your chance of getting approved. In this article, let’s discuss the steps you can do before applying for a bad credit car loan.

Be realistic. First, you need to objectively evaluate your situation. Do you really need to buy a car at this time? Are you ready to take on your payment obligations to your car loan lender? If you really need to buy a car, what type of vehicle do you have in mind?

If you have to apply for a bad credit car loan, it would be best to keep the loan amount as minimal as possible. Obviously, this isn’t the best time to buy your dream car. Choose a car that you can afford and can serve your purpose at the same time.

Consider car dealer financers. There are car dealers that offer bad credit financing at the same time. But you need to be very careful when trying to close a deal as some car dealer financers are known to take advantage of the customer by imposing excessive interest rates and fees. Before you sign up for the loan, be sure to read and understand all the statements in the contract.

Save for down payment. It is very seldom that a dealer will provide bad credit financing without asking for down payment so it’s better to be prepared.

Negotiate for a better deal. Some people may not try to negotiate because of their bad credit. But even if your credit score isn’t perfect, you are still a customer who deserves fair treatment. Hence, it’s always worth the effort to try and negotiate for a better deal. Don’t grab the first offer immediately. By taking this extra step, you can significantly reduce your interest rate and monthly loan fees.

Prepare the paperwork. You will be required to submit documents that will prove your capability as a borrower to keep up with your loan payments. Examples of documents that you might be required to submit are copies of your pay slips, driver’s license, utility bills, bank statement, car insurance, personal references, etc.

Strengthen your eligibility. Despite having bad credit history, work on your positive points. For instance, bad credit car loan lenders will be looking for stable employment so if you’ve just recently been hired, you should wait until you are through with the probationary period or you have reached the regular employee status before applying for a car loan.

If you are a tenant who have just moved to a new location and have just began a job at a new company, you’re most likely to be considered as a "high risk customer" and therefore, your car loan application may get declined.