Banks and financial institutions are much more strict on the rules and guidelines when it comes to approving someone for a loan for a used car during a credit crisis. Many lenders will simply shut their doors on people with below average or poor credit.

Buyers with credit histories showing the slightest bad decision are being denied for loans when before a one-time bad deal would not be considered for denial of a loan. Most of the time an automotive loan would be denied because of habitual bad credit decisions, not one-time offenses.

The U.S. auto dealership group, AutoNation Inc., says that approvals for car loans have gone from 90 percent last year to a current 60 percent. Terms for loan approval are going to be much more strict for marginal and even good credit scores during a credit crisis. Some looking for a used car loan are going to have a down payment of 20% to 30% rather than the 0-10% of the recent past. Some people who would have been approved under normal circumstances won’t be approved during a credit crisis. And those who do get loan approval are either getting loan payments for more than they can afford or are not getting approved for as much as they would like to have. Interest rates are also higher than expected, even for those with good credit.

Another major concern when it comes to getting a used car loan is the loan value of the car. Many car buyers opt for very long repayment plans when buying a car, which lowers the monthly payment. But the problem occurs when trying to sell the vehicle. That long repayment plan has made the pay-off of the car more than what the actual value of the car is. You will either have to try and sell the vehicle for that price or continue paying on a car that is no longer yours.

When wanting to get a used car loan during a credit crisis, good credit is the number one priority. Without a really good credit score, the chances of getting a loan with low payments and a low down payment are almost impossible. Making sure you have enough income coming in to cover current bills and other expenses on top of your car loan payment is another important issue to consider. Don’t take on more debt than you can afford to pay each month.

Before applying to get a car loan, take a look at your credit score to see where you stand. The lower your score, the less likely you will be able to get a loan. If your credit score is less than stellar, try saving up a good amount of cash to be used as a down payment. Putting a large amount down will sometimes help get approval since the loan amount can be smaller. A good way to get cash is to sell your current car to a private party and use that money as down payment on another car. If your current car can be sold for $10,000, use that money for a large down payment or as a safety net if you get approved for some, but not all, of the price of the car you want. You can then use the cash to pay the difference.

During a credit crisis, having great credit is the best way to get loan approval, but there are alternatives for even those with poor credit. Many lenders will work with you to come up with a solution for your used car purchase.

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