Tips for Buying a Car with Bad Credit
Buying car with bad credit is indeed a hazardous agreement. Occasionally it such occurs that people with unattractively low credit score happen to pay excessively for the car or are not eligible enough to afford a loan.
Pointed underneath are several versatile tips to remember and perform while buying a dream car with bad credit.
- Check Your Credit Report – As soon as you start planning for a car, go through your credit report thoroughly and try to clean it up as much as you can. A good credit report improves your rate of approval to get a loan. Cleaning up your credit means clearing outstanding bills and minimizing credit card errors.
- Check Current Interest Rates – A quick online search will show you the current status of interest rates that would be applicable to you. If you have a bad credit report, your interest rate will be higher. Be wary of loans having interest rates more than double the current rate because it will majorly affect your monthly installments and will also bring down the rate of the car you can afford to buy.
- Avoid Additional Expenditure – As difficult as it might be, try to minimize extraneous expenditure in the time before you apply for the loan. Make payments on time. Do not make any major purchases. Most importantly, do not apply for new credit cards.
- Get A Pre-sanction – A pre-sanction from your bank or credit society will give you a figure from which you can work out other modalities. Contact the agency through which you have decided to get a loan and ask them for a pre-sanction letter. If they decline, your car dealer could help you get in touch with an agent who deals in such matters.
- Make A Bigger Down Payment – If you have money in hand, you can opt for a bigger down payment at the time of purchasing a car. This way, your loan amount will be lesser, there will be fewer installments and you could even choose a bigger car.
- Avoid Accessories – If you are buying a car on bad credit, you already have a lesser loan amount and a higher rate of interest. Skip the extra features and accessories that come with the car like leather upholstery, speaker system etc. Buy the basic version, you will be able to save money. You can always get them fitted after some time from elsewhere.
- Read The Documents – This is the most important step while buying a car. Remember that your money is at stake, so however confusing it may seem to you, read all the terms and conditions carefully. Don’t believe everything that the dealer says verbally. Make sure whatever he says is there in writing.
The Acquisition Process when Buying a Car for Bad Credit
If your credit score is below the customary standard and banks do not authorize you to apply for a loan, you can search some neighboring car auctions for buying your dream car. This is undoubtedly, a great idea to implement if you are buying a car with bad credit.
In spite of the cars being second hand, you can get them even beneath the wholesale price or in some cases, you can even get the latest car model by doing a down payment. In such matters, you can decide on for loans that will be easier to earn if cash upfront is not nearby with you.
This is also an appropriate alternative to compensate for a higher interest rate and purchase a high priced car from the dealer.
Learn about your Credit Score when Buying Car when you have Bad Credit
Before proceeding to purchase a car or opt for a loan because of your not so attractive credit, you definitely need to know your credit score. You can easily formulate a credit report online once you Google with the keyword “free credit report.”
Once you get to see the list, you can chalk out where you are standing and once you get to perceive your credit status; your dream of driving a brand new car might not get shattered. Check the list underneath to get an understanding of how some banks consider your credit score.
However, some lenders are there who don’t prioritize to check your credit report.
- 720+ actually good
- 680+ good credit
- 640+ minor credit
- 600+ slightly bad credit
- 580+ busted credit
- 525+ bad credit
- 480+ terrible credit
Is Buying a Car when you have Bad Credit Possible?
Even though your credit situation is not in a good silhouette, there are still a handful of ways by which you can actually own a car. Since you have already checked your credit score online and have at least an initial knowledge regarding what to expect, you can currently undertake the following processes to ensure you get the possession of a car.
- Checking your credits from Bureau- This is a recommendation by Consumer Financial Protection Bureau (CFPB). Sometimes an error or a mistake can be present in your credit which might result in an appalling score and if you tally your score with the major bureaus, you might come across certain minor mistakes exclusion of which might stand you a better prospect.
- Shopping Around for variation- Sequentially, to garner a better design about what the lenders can offer you for auto finance, you need to shop around a bit. However, you need to be prudent enough not to tarnish your credit history with numerous inquiries. The moment you apply for a loan, the lender will instantly verify your credit status and generate a score and applying for multiple loans over a certain period of time can actually lower that score. Therefore, be definite to inquire within 14- 45 days as that will be counted as a single inquiry.
- Going for Preapproval- The advantage of getting pre-approved is that, you have a transparent knowledge of the amount of loan and can, therefore, choose your car accordingly. Thus, converse with the bank or the lender to be acquainted with this pre-approval deal.
- Having a Co-borrower- Another way of acknowledging the conviction of the lender is by collaborating with another borrower. This person represents an assurance and takes up partial responsibilities alongside you in this combined auto finance. Even though you inadvertently miss your monthly payment, your partner will be there to disburse the amount which will prevent further lowering of your credit score.
- Not going for accessories- When you have a limited quantity in your hand, don’t splurge on unnecessary luxury. The car dealer might tell you, how significant it is to have certain things for your car. But do not go for such accessorizing in the first instance rather; accumulate your money strategically for the car payment.
- Knowing your loans- Enquire about all probable factors offering you extended warranties. Generally, the loans for older vehicles are greater than the newer ones and so buying a novel car is beneficial unless you have an astounding second-hand car. Also, choosing a shorter-term loan might curb your monthly payment but surely consider that unless you need a wider time period.
Ways to Improve your Credit Score
The greatest thing which you can accomplish to appear in the good book of the lenders is to enclose a praise-worthy good credit. After knowing your score, you must always strive to rebuild your credit and improve your impression.
Addressing the errors in the calculation, clearing your credit debts timely, going through your precedent collections and tax liens and doing away with those, will unquestioningly enhance your standing.
Presently, buying car with bad creditis not that complicated rather proper working out of these afore-mentioned responsibilities, sealing the perfect deal, and leading a disciplined credit-life will thrust you to succeed. So, pursue these and Voila! Your dream car is ready.
Given the following pointers, remember to always plan and budget carefully, set goals accordingly and try to stay clear of a bad credit. Nevertheless, there will always be companies that welcome clients like you who are buying a car and you have bad credit.
How to buy car with bad credit