Your credit rating is in the dumps and you need a new car. What are you to do? Fortunately, there are lenders who specialize in bad credit and can make driving a car a possibility. Furthermore, you may be able to get behind the wheel of a vehicle that will give you many years of driving pleasure. Here is how to make that dream a reality.
Five Major Advantages Of Buying Through Car Dealers
Review your credit. You need to know precisely where you stand with your creditors. If you have bad credit, then there may be problems listed on your credit reports. Obtain copies of all three of your credit reports by visiting AnnualCreditReport.com. Review each report and take note of problems that have caused your score to drop. You may need to catch up on a few late payments before you apply for a car loan. When you do catch up, ask your creditors to amend their notices to show that you are current. If they do, then your credit score will improve.
Obtain your credit score. Your three-digit credit score tells a lot about your credit position. Here, you can visit Credit Sesame and sign up for a free account. In doing so you will be provided with a credit score, one that matches the score creditors use when determining your creditworthiness. The reason you want to obtain the score yourself is to confirm your credit standing before you apply for a loan.
Evaluate your score. Credit scores range from 300 to 850. The higher the score, the better for you. If your score is at least 720, then you have outstanding credit. If your score is 650, then you have fair credit. It is when your credit score falls below 620 that it is considered poor, what puts you in bad credit territory. Know that it will be more difficult to secure a car loan in this range.
Ask your banker. Likely, you do business with a bank or a credit union. That business relationship can serve you well, enabling you to secure a loan that you might otherwise have missed. Speak with your banker to determine if you are loan eligible and at what interest rate. Still, you may want to go to the next step if you are approved for a loan with a high interest rate.
Shop around. Thousands of lenders want your business. Well, they want your business if you have good credit. However, there are lenders that specialize in lending to consumers with bad credit. You can find these lenders by entering “bad credit car loan” within the search parameters. Then, carefully review the results and what is required of you. For example, you may find that a lender will give you money, but require you to put up more money than usual and that would be your down payment. Avoid those lenders that pitch to subprime lenders only — you want to work with a strong financial institution that lends to a variety of consumers.
Your interest rate matters most. Don’t concern yourself with monthly payment amounts, at least not initially. What you want is a loan that has a lower interest rate. Chances are your rate will be in the double digits, so avoid those loans with rates that are 15 percent and above. You’ll end up paying far more for the car with a higher interest rate.
Loan Decisions
Securing a bad credit car loan is not an easy matter, but it can be done. You may have to lower your expectations a bit, but don’t settle for a bad loan for a bad car — you will only multiply your problems down the road.
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