Credit is the foundation of many major economic decisions, with a good or bad credit score controlling approval rates and interest paid on loans and credit cards. Bad credit means a higher interest rate and difficult approvals for personal loans, mortgages, and even car loans. Though obtaining reliable transportation is essential to keeping a job and maintaining a family and responsibilities, car loans for people with bad credit can be hard to come by.

To find out if you have bad credit, check your credit report for delinquencies and high usage to limit ratios on revolving balances. This in combination with a poor or short credit history can lower a FICO score. Your FICO score is based on information from your credit history, and is used by lenders to see how risky it is likely to be to offer you a loan. You can see if you have bad credit by checking your own score – everyone is entitled to one free credit report per year by law, which can keep consumers from being surprised when shopping around and applying for a car loan.

If the credit is indeed poor, one should first consider a peer to peer lending program to finance a car. Taking a loan from a friend or family member can be hard, but the interest rate charged is often much lower that what could be obtained through a bank or finance company if you have bad credit through no fault of your own, getting a car loan from someone other financial institution might be your best bet. If a family member or friend is not on hand to help out, check into an online peer to peer lending website. Most of these sites have strict requirements, and often expect a certain credit rating, but it is worth trying. The benefit is that even with used cars, the terms of the contract can be chosen by the borrower, not the lender, allowing for a lower payment and greater financial flexibility. Also, there is usually no appraisal required and very few questions asked about the purpose of the loan.

In the case that a loan will be needed from a bank, find out what the credit requirements are at each bank before applying. Each application turned down will show up as an inquiry on the credit report, and in turn can hurt your chances of getting an approval elsewhere and hurt the FICO score. Be selective of where to apply, being sure to pay attention to the correlating interest rates, early payoff fees, and terms of the contract. The car loan application process will consist of supplying a driver’s license, social security number, and other information about income and liabilities. If the final interest rate and monthly payment is unusually high, be prepared to offer a down payment on the vehicle in an effort to lower the loan balance and the amount of interest that will have to be paid.