When your car breaks down beyond repair and you have bad credit, you might think you're doomed to ride the bus to work every day. However, it's often possible to get a car loan even when you have bad credit. You just need to know what you're getting into when it comes to the terms of the loan. Here are some ideas for how to buy a car when your credit is fair or poor.
Look At Your Credit Report First
The first thing you want to do is look at a copy of your credit report. It's easy to view your credit report by going online. You don't have to pay for the service since you can find ways to get your credit report free. It's important to know what's in your report and what your score is when you go shopping for a car. Tell the car lot up front that you have bad credit and you want to get a good deal. Facing your score head-on will save time when you go car shopping and it will put you in charge of the negotiations.
Have Money To Put Down
You'll probably need to put money down on the car when you have bad credit, so be prepared. The amount will vary by car lot and lender. If you shop for a car at a lot that specializes in bad credit and offers their own financing, you might get a better deal when it comes to the amount of money down that you need. Another thing to keep in mind is that you may want to buy an older car with a lower cost so you can decrease the amount you have to finance. If you're working on cleaning up your credit and you make payments on time when you buy the car, you may be able to upgrade to a newer car in a year or two once your credit score has improved.
Understand The Interest Rate
If you buy from a car lot that runs your financial information through several lenders, you may end up with a car loan company that specializes in bad credit loans. While these can be a lifesaver, they usually come with a high interest rate. You'll want to understand how the high rate will impact your payments and the final cost of the car. Always know what you're getting into so you can handle the payments for as long as you need to keep paying on the car.
Before you go shopping, figure out how much you can afford for the monthly payments and stick to the price. The lender may extend the life of the loan to keep your payments low, but that could also mean you'll pay more for the car due to the extra interest.
Buying a car with bad credit can be done. You may even be able to buy a brand new car with bad credit if your income is high enough to qualify. Whether you buy an older car or a new one, when you make the payments on time, the car will help you gradually improve your credit score over time. You may eventually be able to trade the car in or refinance it to get a better interest rate when your credit score improves. Contact a company, like AutoStart, for more help.