You’ve been eyeing a new car for months. You’ve checked out its features and reviews online; and you may have even taken it for a test drive from your local auto dealer. You think you know exactly the vehicle you want to buy. But there’s just one problem. You are saddled with bad credit.
Will bad credit sour your ability to buy a new car? “Unfortunately, buying a car with bad credit is tough, even if you have the income and a stable job history,” writes The Balance. “A history of late payments, high debt, bankruptcy, or repossession is a sign to the lender that you’re at risk of defaulting on your loan payments, and lenders want to avoid the expensive process of repossessing your vehicle.”
But don’t give up hope just yet. There are still tips and tricks you can leverage to get you behind the wheel of a new ride. Here’s how to buy a car with bad credit.
Examine Your Credit Score
First things first, you ought to examine your credit score; especially if you haven’t checked in a while. Who knows, it could be better (or worse) than you imagined. In case you didn’t know, you are entitled to one free copy of your credit report every 12 months.
Sometimes these reports will elucidate methods to improve your credit. Examples include paying off past-due bills, disputing errors on your credit report, and adding positive information that may have been left off your report.
Once your credit report is ready, it’s important to avoid adding additional bad credit items to your background. Don’t thwart your efforts to buy a new ride by making late rent payments or anything of that ilk.
Check Interest Rates
The next bit of research you should complete is the expected interest rates online. Assuming your credit score is less than stellar, it is likely to be higher than the average. That being said, be wary of interest rates double the average. If faced with excessively high interest rates, either shop around for a better deal or put your purchase on hold until rates (or your credit score) improve.
Make a Substantial Down Payment
Since your loan rate will affect your monthly payments and the overall price of your car, it’s best to limit the amount of credit taken on. Luckily you can reduce the amount owed by simply making a large down payment.
A hefty down payment can counteract fees, interest, and taxes – thus saving you more money in the long run.
Shop Around for Vehicle Financing
When you are ready to apply for financing, it’s important to shop around to find what options are best for your needs. If you are searching for a direct-to-consumer bad credit car loan, companies like RoadLoans, companies like RoadLoans make it easy for you to apply online. Services like these also offer auto finance calculators which estimate the costs to see what you can afford.
Similarly, you can prequalify for a car loan; meaning you can walk into a dealership already knowing the terms of your long, the ARP, loan duration, and more. This is often the option of choice for many car buyers, since it demystifies the process before arriving at the dealership.
Know When to Say “No”
Deserved or otherwise, car dealerships have a reputation for “tacking on extras” during negotiations. Sports packages, leather upholstery, optional entertainment systems, and the like can run up the cost of your new automobile. For those struggling with bad credit, these add-ons can take a long time to pay off, at best. At worst, they may lead to you getting rejected for a large loan.
Hopefully this guide has given you newfound confidence to buy the vehicle you want, even if you are struggling with bad credit. Have you used one of these methods before? Tell us in the comments below!
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