If you have been turned down for a car loan, do not give up. There are simple steps you can take to make car ownership possible even if you have a bad credit history.
While some institutions do not lend to people with bad credit, there are several that will. Bad credit auto loans are designed for consumers who have a low credit score. However, you want to make sure that you do not get a loan with super high interest rates due to your bad credit history.
Buying a car with bad credit does not have to be difficult. Get your documents together, implement the tips discussed here and make your move.
Information Is Power
At some point, you may spot an opportunity to negotiate or benefit from a deal. Your credit score gives you the information you need to understand your financial situation. It helps to determine what you qualify for in terms of interest rates and the maximum principal that you should be allowed to borrow.
You may have been told that your credit is bad, but you may not actually know your credit score. Contact a credit bureau and ask for your score. If you have not recently requested your credit report, you will be able to get it for free.
Additionally, having your credit history allows you to look for any mistakes or unpaid debts. Pay any late debt, and contact your creditors if you see any mistakes in your credit history. If these are addressed, your credit score may improve.
Get Pre-Qualified Online
Knowing that you are qualified to purchase the vehicle you want can make you feel confident as you consider your options at a dealership. You can often get pre-qualified for an auto loan online. This way, you will know what your spending limit is ahead of time. Knowing your maximum loan amount can also help you to set a firm budget and negotiate with the car dealership.
With pre-qualification, you will experience less stress while searching for your ideal vehicle. Once you select a car, the paperwork can be quickly completed, since you have already taken the initial steps for obtaining a car loan.
Always Shop Around
Shopping around for everything from auto parts to used cars always gives you an advantage. If you are in a hurry, it can be tempting to go with the first sales agent who offers you a deal.
Give yourself adequate time to compare prices at different dealerships and interest rates at different lending institutions. Talk to your financial institution about the auto loan options they offer.
The best no credit car loans may not come from the place that you expect. Even location can alter the price significantly, so use websites to compare prices at different dealerships in different areas.
Save With Apps
If you have bad credit, you do not want to spend more than necessary on a car. Fortunately, today’s car buying assistance apps can be used to help you find dealerships near you, check the market value of a car and more.
Kelley Blue Book is a popular app for car shoppers because it tells you how much a car is worth, allows you to compare vehicles and helps you to find dealers near you. The Edmunds app is a similar program that will help you to look at several vehicles and their prices. With the help of these apps, you can find the right fit without spending too much.
Timing is everything. If you do not have to buy a car immediately, it sometimes pays to wait if the situation might change in your favor. For example, you may want to wait for an improvement in your credit due to debt you recently paid off. Keep your eye out for seasonal car deals or other advertised sales events.
Since the dealerships with good sales are sometimes popular, their vehicles move off the lot quickly. Try to sign up for email promotions so you will know when an event is coming up.
Make a Larger Downpayment
A car loan for bad credit will cost you less overall if you make a larger down payment. This automatically reduces the principal, so you will pay less interest on the loan.
If possible, you can make a down payment of more than the minimum. This reduces your interest payments and keeps more cash in your pocket every month. Even $200 extra can make a big difference over two or three years.
How would you feel if you discovered another customer got a better deal than you just because they negotiated? It does not hurt to ask for a discount, and you just might get it.
If you are in the military, education, health or law enforcement fields, you may be able to get a special deal. If a discount is not explicitly advertised, just ask.
Avoid Common Pitfalls
Some dealerships advertise bad credit no money down deals. While these may seem great, they are often not. When you do not pay any money down, you will owe a lot more and pay a lot more in interest. Always calculate the total cost of a loan when doing comparisons.
No credit check car loans and loans for people with bad credit are sometimes available from sub-prime lenders. It is best to avoid these because the interest rates are extremely high.
Bad credit car lots sometimes offer instant approval to clients who want to purchase a vehicle. Always read the terms of these and any other agreements very carefully before you sign.
Some variable rate loans start you at one rate and then switch to a higher interest rate later on. Others do not let you pay off the loan early without facing penalty fees. Read every detail carefully and ask about anything that seems unusual.
There is no need to settle for a loan that you cannot afford to pay back. Try these tips to see if they can help you get a fair auto loan even when you have bad credit.