Having bad credit is a terrible feeling. There are so many things that require having good credit, like buying a home, getting a loan and purchasing a car. That low number can make a person think there’s no hope. However, there are other options for people whose credit is not so stellar.
Not every major purchase is so unforgiving but it’s still possible to purchase a car with bad credit, there are just a few things that have to be considered first. Here are 10 tips to help beat that low score and buy a new car without worrying.
10 Watch Out For Scams
When someone has a low credit score they become a prime target for elaborate and convincing scams. These predators are very good at what they do so be on guard and don’t become a victim!
Predatory loans always end badly for the car buyer and often result in further blemishing an already bad credit score. No new car is worth the grief of dealing with a loan shark. No matter how desperate the need to have a car or smell that new car smell, resist! Bad credit can be overcome, but owing a loan to unsavory people is a much bigger struggle.
9 Read All The Paperwork
Taking time to understand loan documents is of the utmost importance. Yes, they can be confusing. Yes, it can feel like a hassle. But remember: it’s your money and your credit that is at stake here. Make sure that all the paperwork is legitimate, and that everything that the dealer verbally agreed to is in clear writing in the formal agreement.
Taking these precautions prevents shady dealers from letting a buyer “accidentally” drive away without signing, and then calling them back to sign papers with drastically different terms than were originally discussed. This classic scam can be avoided with forethought.
8 Beware Of Buy Here, Pay Here Pitches
Although “buy here, pay here” car lots offer an exciting prospect because of being able to pay out of pocket and there are more flexible credit qualifications (sometimes they won’t even do a credit check), they also have a pretty sketchy reputation. Cars are often overpriced and of poor quality.
The salesmen feel comfortable taking advantage of buyers with bad credit. It’s best to ask for recommendations for a dealership and to take the time to really check the value and the history of the car. If you can take a mechanic friend with you to check the condition, even better.
7 Skip The Bells And Whistles
Trying to buy a car with bad credit doesn’t make it impossible, but it does limit the options. Because you’re not likely to get a higher loan amount with a low credit score, the nicer features for a new car may have to be sacrificed.
Plush leather seats, sunroof, and an expensive premium speaker system are not realistic options when you're trying to buy a car with bad credit. With bad credit, a higher loan payment is necessary, which means a high-interest rate. Putting in bells and whistles only adds to the overall cost and isn’t a wise decision.
6 Get Pre-Approved
Getting a pre-approved loan can take a lot of the anxiety out of getting a car. It makes shopping easier because you have a realistic price range to work with.
It’s a simple process to go to your bank or credit union and ask about getting a loan and about the pre-approval process. It’s also a good option and can alleviate a lot of the stress involved.
If the bank doesn’t approve the loan, a car salesman might be able to refer or give contact information about a lender who doesn’t mind working with car buyers who have low credit scores.
5 Know What You Can Afford To Pay
Everyone dreams about having a nice luxury car to get into in the morning, but it’s much better to be realistic. It’s tempting to overestimate what is affordable, but don’t make that classic mistake.
Here’s a trick: at the end of the month, after paying rent and bills, as well as expenses such as food, calculate how much money is leftover. The budget for your car payments, including the running costs, should never exceed this figure.
Look over the budget with a critical eye and see what is really affordable; then stick to that amount and don’t ‘budge it’. That goes for getting a loan too.
4 Don't Expect To Trade-In For Something New
Everybody wants a nicer car, but let’s be realistic: it isn’t wise to trade in a car with a bad credit score. Improving a low score and then trading is the only way to go, but this takes time.
Some car salesmen will build up a buyer’s hopes, convincing them that they can trade-in for a newer model in the next year or so. However, especially when bad credit is on the table, that simply isn’t true. When this is done, the balance of the old loan is added to the new loan and payments increase or the repayment period extends.
3 Check Interest Rates
Checking current interest rates is super easy. The latest average auto loan rates can be checked online and will give the buyer a better understanding of what rates and interest and pricing to expect.
When there’s a low credit score it’s typical to have a higher interest rate, so don’t worry. However, don’t be fooled by the number. If the loan rate quoted is more than double the average, be skeptical and do more research. The loan rate will not only affect a monthly payment cost but will also raise drastically increase the price tag on any vehicle that’s being considered for purchase.
2 Avoid Worsening A Bad Credit Score
Just stop buying things! Just kidding. In life, using credit is still necessary even if it's bad. Here are some tips: pay off everything on time. Don’t make any other big credit obligations and avoid getting a new credit card.
Basically, good behavior is mandatory. Things like late rent payments, charge-offs, debt collections, bankruptcy and lawsuit judgments show up as bright waving red flags to an auto lender. If this is to be avoided, then some major changes to spending habits may have to be made. It’s not as difficult as it sounds, but it is serious.
1 Work On Your Credit Beforehand
This is the best piece of advice and the best option. The great thing about a low credit score is that it doesn’t have to stay low. By paying things off in a timely manner and getting rid of unnecessary expenses, credit can go from bad to fair to good in a reasonable amount of time.
Pay off past-due accounts, dispute credit report errors, and add positive information to your credit report. This will vastly improve the chances of getting a loan approved on good terms. It takes time, but patience and diligence are guaranteed to pay off in the end.