A less than stellar credit history can really put a damper on your goals and expectations. Poor credit can raise interest rates, prevent you from finding housing, or even sour your chances for getting a car loan. But before you give up hope, there are a few things you can do to secure a car loan even if your credit could use some work.

Understand Key Terms

Before we dive into the nitty gritty of finding poor credit, car loans, it’s probably helpful to define a few key terms you are likely to see again and again.

Annual Percentage Rate (APR): APR is the annual percentage you will pay interest on your loan.

Balloon Payment: Monthly payments are low, but require a hefty payment at the end of the loan.

Cash-Back Refinancing: A loan which grants you the use of your vehicle’s equity to earn cash back while refinancing your ride.

Debt-to-Income Ratio: A ratio expressing the percentage owed compares to the borrower’s total income.

automobiles, automotives, black and white

Default: A failure to make timely payments may result in a breach of the credit agreement. It should go without saying, you do not want to default on your loan.

Delinquency: Making loan payments past the due date (and past the forgiveness date).

Down Payment: The amount of money you put down; which affects the amount finances on your auto loan.

Equity: The value of your financed vehicle after deduction of debt against it.

Poor Credit: What constitutes good versus bad credit? Well, good credit ranges from 700 to 800 while bad or poor credit is anything below 601.

Principal: The total amount owed on your car loan, not including interest.

Refinancing: Financing an existing car loan with a new lender. Often useful for reducing the interest rate, monthly payments or change in loan terms.

Sticker Price: Also known as the “list price” or “MSRP”, this is the suggested retail price for the car.

Title Loan: Also known as an auto equity loan, this type of loan leverages the equity of your car in order to lend you money. The lender holds the title of your vehicle until paid back in full.

Now that we have tackled the terminology, we can get into the details.

Investigate Your Credit Score

Admittedly, some auto lenders will turn you down due to poor credit. This is because the lender sees you as a risky investment. Fortunately, there are places to get a car loan with poor credit. But in most cases, it’ll cost you more in the long run as low credit scores relate to higher interest payments.

Keep in mind that making consistent, timely payments on your car loan can actually improve your credit. So be sure to take this responsibility very seriously. It’ll be worth your while.

Shop Around to Fit Your Needs

While the dealership may recommend that you get an auto loan through their preferred lender or credit union, it’s wise to do a little shopping yourself. You may be able to find a poor credit, car loan for your needs. If you can handle hefty monthly payments, discuss this with potential lenders to see how quickly you can complete your auto payments. If you prefer small monthly payments, find a lender willing to stretch out your payment period as long as you’d like.

Just know that the longer it takes to pay off the vehicle, the more you are paying in interest.

Consider a Cosigner

If, despite your best efforts, can’t find an auto loan that works for you, there is one last option you can employ – asking a friend or family member to be your cosigner. A cosigner takes on some of the responsibility for the debt in case the borrower defaults on their loan. If you do decide to take this route, know that failure to pay what you owe could result in disagreements between friends or family member.

So long story short, yes you can get a car loan with poor credit. You might just have to do some extra research and digging to find the auto loan that works best for your situation.