6 Important Things You Should Remember while Buying a Car with a Low Credit History
Do you have to hold yourself back from buying a car because you have a bad credit history? Your credit history can be a big factor in a car loan approval and also it will affect the interest cost you have to pay financing your purchase. Sadly, buying a car with bad credit is quite hard, even if you have the income and a stable job history. A history of high debt, late payments, repossession or bankruptcy is an indication to the lender that it’s risky to lend you money as you may default on your loan payments, and lenders wish to avoid the expensive process of repossessing your car. However, there are hopes! Bad credit need not stand in the way of your ownership of a new vehicle. You just have to shop a little differently and be prepared for higher costs. In that case, you must be as informed as possible. Here’s what you should know.
1. There are Low Credit Car Dealerships
If you didn’t know so far that low credit car dealerships do exist, you should know it. Frank’s Auto Credit, for example, is such a low credit car dealership that specializes in getting everyone approved including those with a low credit score. If your low credit score is stopping you from applying for a car loan, they’re there to help you out. Regardless of what your situation is, they’d help you get a low credit car loan. So, you can consider approaching them.
2. Work on Your Credit
As soon as you think on buying a new car, first check your credit report, even though it’s months or even years in advance.
Study your credit report and find out the items that are damaging your credit score. Then clean up your credit by paying off past-due accounts and disputing credit report errors and add positive information to your credit report before a car dealership looks at it.
3. Stay Away from Additional Bad Credit Items
Once your loan application proceeds, be a good guy. Pay everything on time. Never take on any other major credit obligations. Avoid opening new credit cards or charging high credit card balances. Potential danger signs for an auto lender include late rent payments, debt collections, charge-offs, tax liens, bankruptcy and lawsuit judgments.
4. Learn about Current Interest Rates
To better understand what interest rate you should expect, go through the latest average auto loan rates online. With a best possible credit, you might qualify for a rate at or slightly above average, whereas with a bad credit, you’ll have to have a higher interest rate. However, beware of any loan rate more than double the average. Your loan rate will influence not only your monthly payment, but also cost of the car you plan to purchase.
5. Make a Bigger Down Payment
Your bad credit history will limit the size of car loan you can get and a high interest rate will make the amount even lower. In that case, you may have no other way out than approaching one of the low credit car dealerships. Other way around is making a bigger down payment. A down payment can offset the interest, taxes, and fees and widen the selection of cars you can choose from.
6. Understand What You Can Afford
While planning the entire process, avoid overestimating what you can afford so that you can get your hands on a better vehicle. Instead, think on how much extra money you’ll have left over after paying bills every month. That’s the amount you can afford. Study your budget to check what you can really afford to pay and stick to that amount, even you get approval for a loan with bigger payments.
So, even if you’ve a buy credit report, you need not refrain from applying for an auto loan and buying a new car. Use the above tips so that you can soon be the owner of your new set of wheels.
