Is your credit score making you shy away from buying the car of your dreams? It can be harder to get car loans when your credit score is extremely low. Lenders are generally cautious about borrowers with bad credit. But it does not mean that if you have a bad credit score, you will never be able to buy a car with a loan. This is still possible but significantly tougher. You may also have to deal with higher interest rates. Additionally, your loan terms may be restrictive.
If you have been eyeing a car for some time now but are put off by the knowledge that you have a plunging credit record, here are some tips to still get that car that has caught your fancy.
Know Your Credit Status and Repair It
Having a bad credit score can essentially make it more difficult for you to achieve your financial objectives. It makes it harder for you to get approved for any loan or mortgage. Fortunately, having bad credit does not mean the end of your world. There are specific steps you can take to repair your credit score and gain the trust of lenders.
First, you need to know your credit score, so you will have an idea of how much effort you need to give to repair it. You can check with these three credit bureaus: Equifax, Experian, and TransUnion. Getting a copy of your credit report from them is free.
Next, see which things are hurting your credit record. Pay off past due accounts and dispute errors in your credit report, if there are any. As much as possible, add positive information to your credit report before you purchase the car.
Buy from Auto Dealerships That Finance Auto Loans
Dealer financed auto loans are the best options for people who do not have enough cash to buy a new car and struggle with their credit scores. Some dealerships offer no credit check automobile mortgages, which are lifesavers for those who are dying to buy their own cars but are also suffering from having low to no credit scores at all. Some of them may even offer promos that allow you to get a new car with an extremely low down payment or a relatively more affordable monthly payment. The downside to this is that the interest can get tremendously high.
Pay a Higher Down Payment
People with bad credit scores have restrictions in terms of how much loan they can get. The high-interest rates can even make the loan amount lower. When you pay a higher down payment, though, you can reduce the amount of the interest rate, as well as the amount you need to pay for taxes and other fees. Moreover, you will be allowed to choose from a wider selection of vehicles.
Do Not Mind the Extras
You may not get approval for a higher loan amount if you have a bad credit score. This is not something that you should be worried about. You can still buy the car, with one downside — you will have to skip certain features that you may have wanted to have in a car, such as a premium speaker system, keyless features, sunroof, and leather seats, to name a few.
Assess Your Finances
How much can you afford to purchase a new car? Your bad credit will become worse if you overspend or overestimate how much you can afford. Make sure to pay off every debt first before getting into another. Likewise, make sure to pay off all monthly dues and have some savings before proceeding with a car purchase. In other words, come up with a budget for the car and stick to it.
Have a Cosigner
If you have someone who trusts you and is willing to cosign the papers to purchase a new car, you can have better chances of securing a loan. Be sure not to fall behind your monthly payments, though, because the burden will fall on the shoulders of your cosigner.
Shop Around
If you do not get approved in one lending institution or get rejected by some car dealerships, stay strong and continue to shop around. You can also continue repairing your credit score while you try to get loan approval. With a little patience, you will be able to find the right dealership that can offer you the car that you have always wanted.
It is never easy to get loan approvals whether you have a good or bad credit score. Do not lose hope. Do not be afraid to make negotiations and find ways to prove your reliability. Out of the many dealerships that you talk to, there will probably be one who will give their trust in you and help you get the car that you have always dreamed of.