When you have bad credit, banks and dealers are obviously more hesitant to lend you money. However, it’s not impossible to get a loan. Depending on how you approach the situation, it’s entirely possible that you could still get approved.
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Bad Credit Might Not Be A Deal Breaker
Living with bad credit can make things difficult, but it doesn’t have to prevent you from buying a car. With the following tips, you can take charge of your situation and set yourself up for success.
1. Start Improving Credit
The first step is to deal with your bad credit at the root. Being stamped with a “bad credit” label isn’t a life-long sentence. You can gradually work your way back to having a good credit score by making smart decisions with your money.
The biggest thing you can do is make all of your payments on time. The past is in the past and you have to begin making responsible choices in the present. It’s also possible that your credit report has some errors. Be sure to check your report and work with the credit bureaus to correct any issues you find.
2. Shop Around
[pullquote]When you have bad credit, you have to be willing to look around until you find an option that works for you.[/pullquote] If you’re lucky, you may be able to find bad credit financing from a local dealer.
“Bad credit financing is auto loan options that are designed for drivers with past financial mishaps, such as bankruptcy filings or divorces. A credit score of 649 or less falls into the ‘poor credit’ category while anything less than 600 being considered ‘bad credit,’” Toyota of Oxnard explains. “There are many types of bad credit car loans available, and most lenders want to work with you, even if you are applying for a high-risk auto loan, so don’t let a low credit score stop you from applying for loans online now!”
3. Make A Bigger Down Payment
Most people can get approved for a car loan, even with bad credit, but you’ll most likely be limited by the amount of car you can buy. You’ll also get strapped with a high-interest rate if your score fails to cross certain lender-specific thresholds. The easiest way to get around these issues is to make a bigger down payment. This offsets things like interest, taxes, and fees, while also opening up more options for you to consider.
4. Lower Your Expectations
It’s important that you lower your expectations when you have bad credit. Understand that you aren’t going to walk into a dealer and have a bunch of negotiating power. All of the leverage is in the seller’s hands and you may have to compromise in order to get the deal you want.
5. Buy Less Car
There’s a huge difference between needing and wanting. Do you really need a 2017 model car when a 2014 with 20,000 miles on it would perform just as well? It’s okay to buy less car now so that you can afford more car in the future.
Make A Smart Choice
Getting approved for a car loan is awesome. It opens up your options and offers you some flexibility in choosing the vehicle you want. However, it’s important that you proceed with some caution and make a smart choice. There’s a reason you have a bad credit score and the goal should be to make intelligent financial decisions that allow you to claw your way out and repair your score over time. A competitive car loan will set you up for success by giving you a chance to prove to other lenders that you’re responsible.
According to the car finance experts at Lending Expert finance rates for those with good credit start from as low 2.9% APR on finance arrangements between £10,000 – £25,000.
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