Tips To Buy Car With Bad Credit

According to an article in consumers affairs;

In general, it is better to go with a bank or an auto financing lender rather than the car dealership down the street that is offering a “buy here, pay here” deal. If you do wind up with a high interest rate on your car, work on rebuilding your credit score so that you can eventually refinance.

If you suddenly find yourself without a car you might be asking, “How can I buy a car with bad credit?”, well, You DON’T! I know not having a ride can be a problem, like how do you get to work, or what if you want to go out? Well as far as getting to work goes, see if a work colleague lives near you and chip in on some gas for a ride. As far as getting out from time to time, there’s always Uber.

You want to give yourself a few months to save up some money and pay cash for a vehicle until you can get your credit to a point where you can get a 6% or less interest rate. Your choice of vehicle will be better and the total cost for the vehicle will be a lot less.

Another problem with buying a car with bad credit that most people forget is car insurance. Your insurance premiums unfortunately are also based on your credit score. The combined monthly cost of your car and insurance could be challenging. Again, waiting until you have a good credit score will save you on insurance as well.

Here is an example based on $35,000.00 vehicle purchase at 20% versus 6% on a 5-year loan.

$35,000.00 at 20% interest you will pay over $15,000.00 in interest at 6% you will pay approximately $5,000.00 in interest. Quite a difference.

Your total cost for the vehicle is about $15,000.00 less in interest at 6%, and your monthly payment is approximately $250.00 less per month!

OK let’s play a little game, what if you took that $250.00 per month that you’re NOT paying in interest and invested it each month over the same 5-year time period with a 6% return?

Well you end up EARNING $3000.00 instead of PAYING $15000.00. I’d say that’s a pretty good argument for doing everything you can to avoid a high interest car loan.

Instead, put ALL your resources into getting your credit fixed. This will put you in to position to buy at a good interest rate with minimum money down. This will save you a ton of money and you won’t regret it!

Buy a new car or even a used car is never a good investment, but one you can’t avoid. Buy a car with bad credit, as you can see, is yet a worse scenario. Make sure you do whatever it takes to avoid this costly mistake.

Pros and Cons Getting a Low Rate Auto Loan

Getting a good deal for your auto loan is important. It means getting the best possible interest rate on it. A low rate is helpful in more ways than one. But, in order to get a low rate auto loan, you need to know what to do and what to avoid. The following list will assist you in leveraging the best deal.

Do the following Things to get a Low Rate Auto Loan:

· Do consider buying a Used Car

Doing your homework is always helpful as it helps you to evaluate the type of car fit for you. Deciding the type of car you want to buy can depend on various factors such as your income and your core requirement. A used car can avail you a lower rate as compared to a new car. As the purchase price of a used car is cheaper than a brand new car, the lender will be willing to reduce the interest rate on a used car. Low risk attracts a cheaper interest rate. Thus, make a conscious consideration about buying a used car as it can significantly increase your chances of obtaining a low rate auto loan.

· Do know your Credit Score

When you have prior knowledge of your credit score, you are in a better position to negotiate a better rate. A good credit score enables you to build credibility and aim for auto financing that’s within your budget. If you are struggling to improve your credit score, start by paying off your pending debts and overdue bills. Once you have your credit score in check, obtaining a low rate auto loan will be easy.

Avoid the following Things to get a Low Rate Auto Loan:

· Don’t neglect the Benefits of a Down Payment

Many a times the benefits of a heavy down payment are ignored while buying a car. However, a good amount of down payment can directly reduce your interest rate. As a down payment is a proof of your strong financial position, you will be able to negotiate and obtain a low rate auto loan easily. The best down payment amount is 20 percent of the total car price. Therefore, making a down payment is an easy ticket to getting a loan.

· Don’t forget to choose a Short Loan Term

When shopping for such loan, you will have the option of choosing a short loan term. The longer you owe money to the lender, the larger the increase in the interest rate. A short loan term on your loan means you will be able to pay back your loan quickly. Also, it means giving less time for interest to accumulate. As you choose a short loan term, you automatically choose a low rate auto loan.

When you go shopping around for an auto loan, it is a good idea to be prepared. Knowing what to do and what to avoid can make all the difference. So, do not forget to refer to the list of do’s and don’ts for getting a low rate auto loan easily.

How To Repair Your Credit Loan

Having a car has become a necessity in today’s fast growing world. But to obtain a car you need a good credit score. What do you do when you know that it is not as good as it should be and you find yourself in a tight spot financially? The first thought that comes to your mind is whether you will qualify for an auto loan. And, why would a lender approve loan application of an individual who has a spotty credit score? But the good news is that you can get a bad credit auto loan.

What is a Bad Credit Auto Loan?

The simplest definition is that you can get money for buying a car with a bad credit score. A credit score depends on your ‘creditworthiness’. So when you have a bad credit score, getting an auto loan becomes difficult because a lender thinks that you are unable to repay your debts. Today, owing to online services many lenders offer attractive interest rates on a bad credit auto loan providing the borrower a sigh of relief!

It’s no Picnic!

Getting an approval for a bad credit auto loan is no picnic. It means that when your credit score is not in your favor, it becomes difficult to get approval. But, with the following guidelines, approval becomes easy:

· When your credit score is in question, don’t assume that it must be bad. The wise way is to check it yourself.

· It is the best time to shop around for a bad credit auto loan. Many lenders see borrowers with credit issues in a positive light. So it is important to shop around in order to make the right decision.

· Go online! Various loan options are available online which not only suits your needs but also offer you best interest rates.

· Consider a co-signer. A co-signer provides the security which lenders are looking for in a loan application. Your co-signer’s financial condition should be good in order to compensate for your low score.

Different Lenders have Different Viewpoints

Something that is multifaceted can be looked at from many points of view, with each point of view showing something new.

· You don’t have to worry about your credit score since the lenders are not going to looking at it. Instead, the lenders will look at how likely you will pay off the loan in future.

· The approval rate for a bad credit auto loan is higher than other conventional loans.

· It gives you an opportunity to improve your reputation. If you make timely payments, it can provide you with a chance to build a stronger financial standing.

On the approval of a bad credit auto loan, you will now have the money to buy a new car. You will have fixed interest rate and monthly payments. So now when you make the payments on time, it will not only repair your credit score but also build a good reputation with the lender.

Tips to get a Low Credit Car Loan

Many car dealerships advertise financing for buyers with bad credit or no credit at all. It is possible for those with less-than-ideal credit to get a car loan, but due diligence is required to ensure that the terms of the loan are affordable. These steps can help consumers with low credit scores find car loans that won’t break the bank.

1. Know the Score
The first step for potential car buyers who suspect they have poor credit is to find out exactly how low their scores really are. Consumers can access their credit reports and scores from both Equifax Canada and TransUnion Canada, the country’s two credit bureaus. In general, a score of 650 or above is considered a good credit risk in Canada, while below that number puts buyers in the subprime category. This often means higher interest rates.

2. Save a Down Payment
In many cases, buyers can get a lower interest rate even with bad credit by putting money down on the car. A 10% down payment is often enough to access more favorable terms. That means buyers interested in financing a $10,000 vehicle should expect to put down at least $1,000, especially if they have a credit score below 650.

3. Consider a Cosigner
Those who have a trusted family member or friend who has good credit and is willing to cosign on a car loan may be able to afford a better financing package. However, this person must undergo a credit check and agree to serve as a guarantor should the loan not be repaid.

4. Shop Around
Subprime buyers can often pay 9 to 10 percent interest on an auto loan, compared to just 3 to 4 percent for those with better credit scores. Buyers should know these numbers when they apply for financing. Car loans with higher than 10 percent interest aren’t worth the cost, so it makes sense for shoppers to get a few different offers before committing to financing.

5. Do the Math
In addition to getting educated on expected interest rates before shopping, buyers should be aware of what they can afford and stick to that price range. That means calculating the target purchase price based on the total amount you’ll expect to pay, not the monthly payment you can afford. Shopping by monthly payment often means agreeing to longer loan terms, which isn’t usually a good financial strategy when it comes to car shopping.

6. Provide Documentation
The best way to get a favorable car loan despite a poor credit score is by establishing good faith in other ways. When shopping for a loan, consumers should bring copies of recent pay stubs, utility bills, and other documents that prove their ability to generate income and pay back debts.

Though car loans for poor credit are common, a low score doesn’t mean settling for the first offer. Preparation and research can potentially help consumers qualify for more favorable interest rates and shorter terms, saving them thousands over the life of the financing contract.