How to Buy a Car with Bad Credit
People with poor credit will have a difficult time when buying cars. Repossessions, bankruptcies, etc. on your credit report marks you as a credit risk and makes lenders reluctant to offer you credit. These obstacles will not necessarily prevent you from owning a car, though. Observe the following guidelines to buy a car with bad credit:
1. Obtain your credit report
To ascertain your credit situation and how creditors view you when you try to buy a car with bad credit, obtain a copy of your credit report. Free copies are available from credit reporting agencies and a number of credit report websites. Examine your report for any errors and credit red flags. Doing so will raise your FICO score and help facilitate your goal of buying a car with bad credit.
2. Obtain financing beforehand
Before setting foot on a car lot, search for companies that specialize in offering car loans to people with bad credit. People must avoid taking ownership of a car before securing financing. Otherwise, a dealer can notify you that your financing was not approved and charge you with a higher interest rate.
You can shop at banks and on the internet. Each has its own advantages. Online credit suppliers and large banks will likely have departments dedicated to consumers with credit problems. Service from these departments can be impersonal and disinterested. But getting approved online is a new trend as more finance companies are using the internet to find new customers.
Small banks consider car loans on an individual basis. You can meet with a banker and explain your situation and any issues with your credit report. If sufficient extenuating circumstances are present, they can be more likely to offer you a loan.
Lenders will sometimes approve people for a lower priced new car than a higher priced used car. New cars are provided with new car warranties that cover the cost of repairs. If the cost of maintaining a car is less, then the likelihood of borrowers making payments is higher. Additionally, if the bank repossesses a car, it will have obtained a newer model that can raise more money at a repossessed car auction.
Chances of being approved are greater when the car you are buying is “justifiable”. If the bank can see that you are buying a car that is a need, rather than a want, it displays responsibility.
3. Dealer Financing
If you are can’t secure a bank loan, your last option is dealer financing. Low interest rates are possible, but you must be wary of car dealers who will raise the price of the car or offer a low trade in value to make up the difference. Dealers can also be liable to tack on needless extras like credit insurance and extended warranties.
If you try to buy a car with bad credit, it can be difficult but not impossible. Making a convincing case to small banks and getting online loans are excellent alternatives to dealer financing.