If your credit score is on the low side and you are thinking of financing a car, it is an inconvenient truth that you will be paying a higher interest rate compared to those people with good credit. There are ways to get a much lower interest rate despite a low credit score.

Related: How Bad Credit Car Loans Work

Borrowers with good credit standing enjoy interest rates depending on their good circumstances. Maintaining a good credit score is very important. A borrower with a lower credit score can usually expect to pay a lot more. 

That being said, here are some tried and tested ways to get lower interest rates for bad credit car loans.
Check your credit score – It is not enough to know that your credit is bad. You have to know the reason why it is bad. Your credit report contains a lot of financial information and some of them may be incorrect. Common mistakes include;
Paid debts that are listed as unpaid or defaulted.
Mistaken identity – Debts of a person with a similar name may be listed under your name..
Incorrect reports from collection agencies

When you see mistakes, dispute them and your credit score may potentially improve, resulting in a better interest rate.

Determine your financial strengths – You may have other financial strengths that you can use to justify a lower interest rate such as investments, cash flow, bank statements, etc. If you are unsure about your financial strengths, talk with a finance broker for guidance.

Pay off credit card debts – Your debt-to-income (DTI) ratio plays a huge role in determining whether or not your car loan may be approved. The lower your DTI is, the better. One very good way to drastically improve your DTI is by paying off your credit card debt.
Compare quotes – You’ll be surprised how much interest rates vary from lender-to-lender. It is very important to compare quotes. Do not send loan applications to each and every lender as credit enquiries will also affect your credit standing. Instead, work with a finance broker and get multiple quotes with just one application.

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