Life with bad credit can be very stressful, especially when you are worried that it will keep you from getting the things you want and need. If you have credit problems like collection accounts, late payments or negative public records on your credit reports, securing financing can often be challenging. The good news is that just because your credit score is low, it doesn’t mean that you are out of luck the next time you need to purchase a vehicle.
If you have bad credit you may wonder why an auto lender might be willing to take a chance on doing business with you. After all, you have probably had a hard time qualifying for other loans or services in the past due to your bad credit history. The primary reason why auto lenders may be more willing than some other types of lenders to take a risk on you is because an auto loan is secured by the value of the vehicle. This greatly reduces the auto lender’s risk and makes many lenders more willing to work with you even with previous credit problems.
Here are some quick tips to get you ready for purchasing a car with bad credit:
1. Build up your credit before going car shopping
The first thing you should do as soon as you start thinking about buying a new car is check your credit report. If you can clean up your credit before applying for a loan, you may improve your chances of being approved or get better terms. This can include paying off any past due accounts or disputing credit report errors.
2. Don’t acquire any additional debt
Leading up to your loan application, be on your best behavior. Pay everything on time. Don’t take on any other major credit obligations, especially new credit cards. Overdue rent payments, debt collections, bankruptcy or unpaid taxes are also potential red flags for auto lenders.
3. Start saving for a down payment
Your credit history will limit the size of car loan you can get and a higher interest rate will make the amount even lower. A down payment can offset the interest, taxes, and fees and increase the selection of vehicles you can choose from.
4. Know what you can afford to pay
Create a budget to see what you can realistically afford before going to a dealership. Consider how much extra money you have left over after paying bills each month. That’s the amount you’re able to afford even if you’re approved for a loan with bigger payments.
5. Get pre-approved
You can shop more realistically when you have a pre-approved loan amount to work with. Talk to your bank or credit union about getting a car loan and to find out the pre-approval process. If you can’t get approved with your bank, your car lot salesman may be able to put you in contact with a lender who caters to car buyers with bad credit.
Buy here pay here car lots offer on-site financing with less strict credit qualifications and can offer low down payments and manageable car payments. And not all buy here pay here’s are created equal so ask for recommendations or check reviews on Google or Facebook.
7. Skip the extras
Now is the time to be practical. When you’re buying a car with bad credit, you have to sacrifice some of the features you want. Leather seats, a sunroof, or a premium speaker system may not be options when you’re trying to buy a car with bad credit. You’re already facing a higher loan payment because of the interest rate. Don’t make it bigger by adding features to your car.
8. Read all the paperwork
Loan documents can be confusing, but your money and your credit are on the line, so it’s important to take time to understand the terms of the loan. Make sure that what’s in the paperwork matches what the dealer verbally agreed to. If you agree to the terms, sign the loan documents before you drive the car off the lot. Some dealers could let you drive away without signing, then call you back to sign papers with different terms than what you originally agreed on.
9. Don’t fall behind on your payments
Credit agencies look at a lot of different factors when determining your credit score. Getting an auto loan and staying on top of your payments could be key in turning things around and saving you a lot of money in the future. Bad credit does not have to be a life sentence, but it’s completely up to you whether you want your credit situation to change for the better.
Even if you have bad credit or no credit, you might still qualify for financing at J.D. Byrider. If you’re looking for a pre-owned, fuel-efficient car, stop by one of our Columbus stores today and take a look at our inventory.
Changes in the works could boost your credit score. (2017, March 14). Retrieved from 10TV: http://www.10tv.com/article/changes-works-could-boost-your-credit-score