People often think that for getting a loan you need bank balance and a good credit history. It is factual that some banks refrain to lend money to people with bad credit. However, it is not impossible to get a loan with favourable terms given that you have bad credit.
Where there is will, there is a way!
Albeit your credit score needs work, you can still get a car loan that doesn’t break your monthly budget and can be repaid in several payments. However, there are certain things you should keep in mind while finding loan –
- Keep track of your credit score
This gives you an idea where your credit falls in the spectrum of excellent to poor and boosts your confidence to apply for loans. You can improve your credit score by following these tips-
- Paying bills on time
- Checking your credit reports for error
- Reduce your debt as much as possible
- Do a lot of research
Car finance with bad credit needs a lot of research. From the lender to the annual percentage rate (APR) you need to go through each and every component keenly.
- Compare among all the lenders
Look for lenders who focus on serving people with lower credit scores. Though they offer loans at high-interest rates, they can help you to get a car in a pinch.
Make sure you have enough money for a down payment
Down payment is the money-in-hand that the lender will take into consideration for weighing the risk of lending you the loan.
5.Know what you can afford
Find out which monthly loan payment you can afford. Meanwhile, search for market interest rates so that when it comes to negotiating, you can have a clear idea of what you can afford.
- Get pre-qualified with banks and credit unions
Banks are for-profit organisations and are restrictive in whom they lend to. Whereas, credit unions are non-profit private organisations that are more open to lending borrowers with bad credit. So, all you need is to either have a good relationship with the bank or become a member of the credit union.
- Stay away from scams
Before you do a deal, make sure you go through the terms and conditions thoroughly otherwise you may face higher interest rates or down payment.
- Avoid finance with sub-prime dealers and keep a friend with you during the whole process to keep complications away.
Alternative for getting a car loan
Here are some alternative ways you can consider for getting a car loan with bad credit –
- Get a co-signer- They are the people who agree to pay for you if you cannot pay it on time.
- Look for a buy-Here-Pay-Here dealer – In this situation, you can make finance at the same place where you plan to buy your car. Moreover, instead of a third party, the dealership will be directly done by the finance company which can be a benefit for you.
- Look for a second chance lender
Given that you have bad credit, getting a car loan can affect your credits, but whether it will be good or bad depends solely on you and your ability to handle the situation. Nothing is impossible, so you just need to have patience and confidence.