Purchasing a used car can be challenging when you have a bad credit history. Things get tougher due to approvals that result in frustration and stress.
However, you must face the reality that your credit history plays a significant role in getting your car loan approved, even if you are receiving income and have a stable job history.
What do you need to know about buying a used car?
So what needs to be done?
Having bad credit does not necessarily mean that it is impossible for you to get the vehicle you need, but you will have to do some things a little differently, and you will also have to do a little preparation for the costs.
Here are the things that you need to be in the know about the buying process if you have bad credit:
1. Work on your credit card before you consider buying a new car
When a new car comes to your mind, you must immediately check your credit report. If you want to increase your chances of getting your loan approved, clean up your card before applying.
Cleaning up means paying off your past-due accounts and disputing credit report errors. Take the time to add positive information to your credit report.
2. Stay away from additional bad credit items
Do your best to be on your best spending behavior in the months leading to your loan application so as to ensure that you keep your credit standing under control. Avoid getting new credit cards and other major credit obligations.
3. Check current interest rates
Before buying a car, check for the current interest rates. If you have a bad credit history, chances are you might be given a higher interest rate. It will affect your monthly payment.
4. Find a dealer who will be willing to work with you
Finding a dealer who can help you get the car you need, even with a bad debt, should not be that hard. You also have another option of securing a loan through a bank that has already established a relationship with the dealer.
5. Consider getting a pre-approval
In order to better prepare for your future car purchase, you can consider getting pre-approval from a bank or credit union. This can spare you from headaches and obstacles you will possibly encounter in the future.
6. Set a specific budget, and stick to it
Before you even make the final decision, you should already decide on the amount you are willing to pay for the vehicle. Check the amount in total, especially the amount you can afford. Observe how the monthly payment goes.
Do not be tempted to get something that costs more than you can afford. Consider the additional costs that possible repair and maintenance entail.
7. Make a bigger down payment
The amount of car loan you can get will depend on your credit history, but if you try to pay a bigger down payment, it can offset the interest, fees, and other taxes. It can also give you a wider selection of vehicles to choose from.
8. Skip the extras
If you want to purchase a car with bad credit, you cannot expect to be approved for a high loan amount. That means there will be some features that you may have to sacrifice.
Options like a premium speaker or sound system, leather seats, and others may not be available if you buy a car with bad credit. Just don’t make your loan bigger by these additional features, which you can skip now.
9. Read and understand all the paperwork
It is important to take the time to understand the loan terms because these are your money and your credit which are on the line. Make sure that whatever it is that you have agreed to are the things that transpire on the paperwork. Also, sign the document before leaving with your newly purchased car.
