If you're in desperate need of a new car, you may think your situation is hopeless if you have poor credit. While it may be more difficult to get a loan if you have bad credit, it isn't impossible. Here are some suggestions that may help.
Come Up With A Larger Down Payment
If you have good credit, you can probably drive off the lot without making a down payment on the car. Since a buyer with poor credit is a higher risk to a lender, a down payment is often required. The more you can pay up front, the better the numbers look to the lender. However, coming up with the money for a down payment isn't always easy. You may have to lower your standards so you can buy a less expensive car. If the overall cost of the car is lower, then your down payment will be a higher percentage of the price. That might be enough to help you qualify for a car loan. If you know you have bad credit when you go car shopping, then you should be prepared to pay a down payment.
Prepare To Make Higher Payments
Bad credit car loans typically have higher interest rates. That's to help compensate the lender for the increased risk in providing the loan. A higher interest rate equals higher monthly payments. A friend with good credit may get a high-end car for the same monthly payment as you have for an older, used car. Know this upfront and be willing to accept it. After making payments on the car for several months, your credit score may improve enough that you can refinance the car or trade it in and get a better car at a lower interest rate.
Compare Loans From Different Places
While you want to limit the number of credit inquiries on your credit report, you shouldn't have to worry about multiple inquiries if they all occur during the same time frame when you're shopping for a car. This allows you to get various loan offers and compare them. You may want to start with your bank or credit union. You can also check with a local dealer or a car lot that offers its own financing. You may find that car lots will work hard at getting you a loan so they can move a car. Also, some lenders and car lots specialize in cars and loans for people with bad credit, which can be a lifesaver. Just be sure you understand the terms so you end up with a loan you can easily afford to pay back so you can improve your credit when you buy the car, rather than get in further financial trouble.
Trying to get a loan when you have bad credit isn't the ideal situation, but it may be a necessity if you need a car to get to work. You may need to look for an inexpensive car to hold you over for a year or two until your financial situation improves. Improving your credit score by a few points could be enough to qualify you for a better car by the time you're ready to ditch the older one and upgrade. For additional information on how to purchase a car when you have poor credit, contact a company like AutoStart.
