Bad credit doesn’t necessarily mean that you can’t buy a car anymore. You may need to go through some hoops before you get approved for a loan. It is going to be difficult but not as difficult as most people think. If you follow the steps below, you’re not only on your way to getting a new car but you also avoid bad credit scams along the way.
Step 1: Plan Ahead
Whether you’re buying a new or a used car, planning your financing options ahead is imperative. Because you have a less than perfect credit rating, you need to set realistic expectations. You should also expect to pay higher interests than someone with good credit. You are also less likely to qualify for the better loan deals because you are considered a sub-prime borrower. It’s best to know what and what not to expect before making this major purchase.
Step 2: Check Your Credit Report
When buying a car with bad credit, one of the first things you need to do is check your credit report. Ideally, you should do so a few months before you plan to buy. This window of time will allow you to take care of a few outstanding items if necessary. And while you’re at it, make sure that your credit rating doesn’t get it further for the next succeeding months until your car purchase.
Step 3: Check in with Several Lenders
As mentioned earlier, you are expected to pay a higher interest rate than normal because of bad credit. But if you shop around, you may still get a better deal. The trick is to get pre-approved with more than one lender. You can start from your own bank or credit union. Then you can move on with dealership web sites. Some experts may claim that doing this will only further harm your credit score but don’t listen to them. Lenders know you’re looking for the best deals so go ahead and check in with several lenders.
Step 4: Come to the Dealership Prepared
When it’s time to go to the dealership or lender to discuss your options, make sure you bring along the required documents like your recent payslip, utility bill, IDs and personal references among other things. Also helpful is to bring someone along who will serve as your extra ears when reviewing the terms and conditions of the financing option.
Step 5: Stay within Range
Remember step one where you plan before making the big plunge? From the beginning, you should the price range you can afford and it’s imperative to stay within that range when shopping for a loan and your car of choice. You know exactly how much you can spare for a monthly car payment. Sticking with that budget even if you qualify for a more expensive sedan example is the wise thing to do.
Step 6: Consider Refinancing
In case you were not fully satisfied with your loan, you can always consider refinancing once a year or so is up. Remember that getting approved for a car finance loan is difficult enough for people with bad credit. The interest is higher and the terms not always the best. But you can go with the most attractive offer for now and refinance it later to get a better deal out of your loan.
Step 7: Steer Clear from Trade Ups
Trading your old car for a new one may make perfect sense. This is exactly what a number of dealerships offer their customers who are straddled with bad credit. While the offer is certainly tempting, you may want to think this option over thoroughly. When you trade for a better car, you may only end up with more debt to your next loan which isn’t always easy to keep up with.