Having bad credit may give you worries about finding financial help if you are considering to buy a car. However, with a bad credit history, getting a car loan or financing may be tricky. Lenders may consider you for car loans that are subprime. This kind of car financing is a disadvantage. It usually comes with higher interest rates and monthly payments.
Don’t lose hope. People with bad credit can find great car financing if they are willing to do some work. Credit scores can be improved. They can find car loans that will not break their monthly budget.
What do you need to know about car financing with poor credit?
Here are several tips for people to get car financing with poor credit.
Check your credit score
Before even starting to shop for a car, it’s important to get a hold of what your credit score is. There are free tools that offer credit reports. Know your credit score for at least three months before you go out and find a car loan. This will give people enough time to take action and repair their credit score. Do your best to pay off credit balance or at least make payments to show activity on the account.
Once your credit score is run and confirmed it’s poor, there are some steps one can do to improve it. If there are mistakes on the credit score, fix them and it might help boost the score. If the credit score is not as poor as you thought it would be, pay off the debts and credit balances. Take care of the old accounts to increase the score further.
Do some shopping around
When shopping for car loans, don’t be limited to see one lender. There are so many lenders out there that offer car financing with poor credit. Some lenders do a credit check during the application process. This will signal bureaus that someone is going to take on more debt. Don’t draw out the process for too long because it might make it more difficult to get favorable terms.
Try to get pre-qualified with credit unions and banks
Don’t close off options, consider every one. Even with bad credit, there is always a chance that people can be pre-qualified for a loan from a credit union or a bank. It may be difficult to pre-qualify for car financing. If you have a good relationship with your bank, you’ll have luck in getting a car loan that’s manageable. Credit unions are more open to helping out a person with poor credit. Although credit unions require account holders to be members, the process is easy.
Avoid having more debts
Several months before you get a car loan, avoid purchasing or doing anything that may reflect on your credit report. Make sure to pay the bills on time and avoid taking more credit obligations. Don’t be late on rental payments. Avoid tax liens, bankruptcy, and lawsuit judgments as these discourage a lender.
Do not deal with sub-prime lenders
Sub-prime lenders are those people who seem to attract anyone who doubts they can get a car. They usually make car purchasing a stress-free and easy transaction at first glance. The problem is that they come with very high-interest rates that won’t help improve the credit score you have. Some will even use the vehicle purchased for collateral. If you fail to make payments, you will also have the risk of losing the car. Do some research and only consider sub-prime lenders if you are out of options.
Know your budget and what you can afford
Be honest and realistic with budgeting and what you can afford. It may be tempting to buy the latest model but that will defeat the goal. Consider the amount of extra money left after all the bills are paid each month. This is the amount that you are able to afford. Create a budget and stick with it even if you are approved for a bigger amount of loan.
It’s not impossible to purchase a new car even with a bad credit score. There are many things you can do, explore the options. Take enough time to repair and improve your credit score if you are able. Check your credit score regularly and don’t be limited to just one auto lender. Make preparations when you think you’re ready to enter this process. Stick to the budget and follow the tips listed above to help you out with getting a new car.
Bad credit doesn’t have to stop you from getting the transportation you need. For more information on car loans, please visit Carfect.