Having a less than stellar credit score can be very stressful. It could keep you from getting the things you want and need. If you have credit problems, getting approved for a loan can often be challenging. The good thing is that bad credit doesn’t have to get in the way of buying your dream car. There are some things you can do to buy a car even with bad credit. Here are a few ideas.
Work on your credit before you start car shopping
As soon as you consider buying a car, check your credit report right away. Taking a look at your credit score early will give you ample time to work on it if it needs fixing. It will also give you time to file a dispute if there are inaccuracies. Cleaning up your credit score before applying for a loan to increase your chances. So, request a credit report from the major credit bureaus. Dispute errors if there are any and clean up your past due balances.
Avoid acquiring extra debt
Be on your best financial behavior during the months leading up to your loan application. Don’t incur extra bad credit items and debt. Make sure to pay everything on time. Don’t open a new credit card or start other major credit obligations. Potential lenders will notice issues. These include charge off balances, bankruptcies, overdue rent payments or unpaid taxes. Make sure that you avoid these red flags.
Check the latest auto loan rates
Before you buy a car with a bad credit, do an online research and check the current interest rates on auto loans. This will pretty much give you an idea of what you should expect. When you have bad credit, you’re most likely going to have a higher interest rate. Yet be cautious if you get a loan rate that is more than double the average. Your loan rate is something you must look into. It will not only affect your monthly payment, it will also impact the total amount of the car you’re going to buy.
Save up for a bigger down payment
With bad credit history, there may be a limit on the size of car loan you can get. And the higher interest rate will only make it worse. To offset the interest, fees and taxes, it’s better to start saving for the down payment ahead. When you pay a bigger down payment, you get to choose from a bigger selection of vehicles.
Determine how much you can afford to pay
Before going to a dealership, determine how much you can afford. Look at your budget and see how much extra money you have left after paying all your monthly bills. If you still have extra money after paying all your monthly dues, it means that it is the amount you’re able to afford.
Getting your loan pre-approved will help you target your shopping. Talk to your chosen dealership, bank or credit union and find out how you can get your loan pre-approved.
Forget about the extras
Buying a car with bad credit could mean that you will have to sacrifice some of the extra features that you want. Your loan payment is already high so avoid adding costly features to your vehicle. There is no better time to be practical than now.
Understand the terms of the loan
Applying for a car loan involves a lot of paperwork. It is imperative that you take time to understand the terms of the loan. Make sure that your loan documents reflect what you and your dealer agreed on. Read everything carefully before finally affixing your signature.