If you have bad credit, the challenge for many is qualifying for a new car loan. Yet you can’t escape the need to get a new or used vehicle eventually, since you’re still wearing out the car you own. Here are a few tips for qualifying for car loans though you have bad credit.
Know What You Can Truly Afford
When planning for the car purchase, look at what you can actually afford. Remember that you will need to pay for car insurance, gas and vehicle maintenance. If you walk in saying you have $300 a month in your budget and ask for a $300 a month car loan, you’ll be rejected because the lender knows there are other costs involved.
Put More Money Down
The risk the lender takes when issuing a loan is directly proportional to the size of the loan. When you put more money down, you’re reducing the risk they take. This is most evident with mortgages. If you put 20% down, you don’t have to have mortgage insurance. Put zero to five percent down, and you’ll pay a higher interest rate and mortgage insurance. The same is true with car purchases, though the financial terms differ. Save up for another month or two to put a larger amount down on the vehicle, and you could secure a lower interest rate. Increase your down payment a few hundred dollars, and it is equivalent to adding 50 to 150 points to your credit score.
Work with a Lender Who Will Work with You
One of the simplest solutions is working with a lender who will work with you. A car lender such as Barrie car loans for bad credit works with people whose credit has taken a hit. By specializing in this niche, they offer loan terms they know you can handle and are flexible on many fronts. It may be a weekly or biweekly car payment instead of a monthly one. It may take the form of a longer car loan, making the monthly payments regularly. Fees and charges might be rolled into the loan balance so you don’t have to come up with money upfront.
Trade In a Vehicle or Two
You may not be offered as much by the dealer as you could when selling your old vehicle via a private sale, but trade-ins have a number of advantages, too. It eliminates the hassle of trying to sell an old vehicle. A dealer is more likely to take a car that isn’t in the best of shape or isn’t running. And the trade-in can be used to raise a down payment for the new car or offset the total loan balance. After all, the bad credit car lender is more likely to be able to sell a used vehicle after it is fixed up than other auto lots.
Don’t Let Your Credit Get Worse
If you’re going to buy a new car with bad credit, it is essential that you don’t let your credit get worse. Don’t open a new credit card when you’re applying for a new car loan. Don’t do this even if the intent is to roll over existing credit card debt to a new, zero interest loan. It hurts your credit. Also take the time to get a handle on your money and pay all of your bills on time and in full. If you’re late with the rent, the lending office will reasonably worry that you won’t pay something less important like a car payment.
Follow our advice, and you’ll be much more likely to qualify for a car loan despite bad credit. And you won’t have to pay more than you have to for your new car.
