Do you have a bad credit? If you’re worried about getting an unfair car deal because of your credit, worry no more. It is possible to get a nice car at a fair price even if you have a less-than-perfect credit. Moreover, banks and other auto loan providers have loosened their credit standards. Interest rates are also still lower. But in spite of this good news, you need to achieve a successful car purchase slowly but surely. Here are some tips you should take to heart when buying a car with a bad credit.
1. Ask yourself: Do I really need to do this?
Before anything else, find the answer to this question first. Do you really have to buy a car now even if you still have a bad credit? An auto loan rule of thumb says that high credit score gets low interest rate and low credit score gets high interest rate. If you can identify with the latter more than the former, you might want to think twice about purchasing a car now.
2. Set the budget and stick to it.
If it is urgent to buy a car, set your budget first before shopping for cars. To find out how much car you can afford, you can use online calculators that compute for this. You can also take a good look at your monthly cash flow. Financial advisers say that the remaining amount from your income after all the priority expenses are allocated for is the amount you can shell out for a car every month.
However, you shouldn’t forget about the ownership costs which include gas allowance, maintenance and repair, warranty, insurance, replacement parts, and the like. Can your current income sustain these expenses over the life of the auto loan? Make sure it can before actually buying a car.
3. Wait and fix your credit.
If your answer to item number 1 is no, wait and fix your credit for the meantime. This is the best thing to do so you can avoid the high interest rates. But how can you fix your credit?
There are several ways to improve your credit. One is getting all your debts in a list and paying them off one by one. This cleans up your payments history and certainly builds up your credit. Another way is to get a secured credit card where you can start afresh in making payments on time.
4. Explore all possible options.
This applies to both financing and dealerships and whatever kind of credit you may have. Auto financing is widely available—and to every type of credit. Auto loan providers—banks, credit unions, independent financial institutions, online lenders and dealerships—are in a tight competition for the subprime market. You can surely find a car loan despite your bad credit. However, you need to find the best rate by shopping around to avoid abusive deals.
There are also a lot of dealerships around your residence. Try checking out at least three and compare their prices. Keep in mind that dealerships do not have the same price for a single vehicle. That’s especially because of the extra fees they charge.
Shopping around is not just a practice recommended for bad credit borrowers but also for those with good credit.
5. Beware of scams.
You must understand that unscrupulous and fraudulent lenders and dealers often pull their tricks on bad credit borrowers, taking advantage of their credit situation. Don’t let yourself be a victim. Before heading to the dealership, make sure you’ve read about scams and learned to avoid them. It’s important to be on your guard while purchasing a car with a non-stellar credit.