The words bad credit have long struck fear into the hearts of Americans everywhere, and while ending up with bad credit can sometimes be out of our control, the fact remains that you can’t do much if your credit isn’t good.
For example, getting a car with bad credit can seem completely overwhelming and almost impossible, leading you to wonder how to get a new car with bad credit without paying cash for it.
Actually, you’re in luck when it comes to low-income car shopping, and there are ways to get a new car even with bad credit weighing you down. Bad credit car shopping isn’t as hard as you might think. In fact, it’s actually pretty easy.
However, there are a few things you’ll want to know first. We’ll talk about those things and more in the article below.
What Is a Good and Bad Credit Score?
When you’re looking for a car loan, you’ll first need to know exactly what a good credit score is and what a bad credit score is as well. Credit scores can be found on three major reporting sites if you’re unsure where to find them. Those sites are Equifax, Transunion, and Experian. These are the websites that most places report your credit to and how you get your score. We’ll list the credit scores below for your perusal.
According to Experian, these are the credit scores that you should go by.
- Exceptional: 800 and over
- Very Good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 579 and lower
If you have a low credit score, then your credit is considered to be bad, and you’ll have a hard time financing anything, especially a more significant purchase such as a truck, van, or car.
Having bad credit doesn’t stop you from getting a car, however. In the section below, we’ll go into a few things you should know when you’re out bad credit car shopping.
Check Your Credit Score
First, you need to go to one of the three sites above, or all of them, and check to see just how bad your credit score is. It’s best to go over your score with a fine-tooth comb because mistakes can be made. If you see anything that doesn’t look right, go ahead and dispute the charge.
Improve Your Credit Score If Possible
While it isn’t always possible, once you check your credit score, start looking for ways to improve it before you head out car shopping.
If you check your credit a few months before heading out to purchase a car, it’ll give you time to make a few improvements. Some improvements to make include the following.
Pay Your Bills On Time
One of the best ways to improve a credit score is by paying all of your bills on time or early. In addition, good payment history is essential to making a significant purchase such as a car.
Reduce Your Debt
Reducing your debt as much as possible is another way of boosting your score before trying to buy a new car. While you might not end up with the best credit before you go to the dealership, it might show enough of a track record so that you won’t have a hard time financing.
Check Current Interest Rates
Just because you have bad credit doesn’t mean you shouldn’t check the current interest rates before you start car shopping. It’s easy to check online to see what rate you will qualify for with bad credit.
If you had good credit, then you’d probably qualify for a slightly lower rate than average; however, with adverse credit, you’ll have a higher interest rate. So you do need to be wary of any interest rate that is double what the average rate is.
It’s essential to note here that your interest rate will determine not only your monthly payment but how much of a downpayment you’ll have to have as well, so try to find the best interest rate you can.
Determine What You Can Afford
The last thing you want to do with or without bad credit is to take on a car payment that you can’t afford. Doing so will only result in your car being repossessed and your credit worsening.
A good rule of thumb to follow is determining how much extra money you have each month after the bills are paid, including groceries and other essentials; the extra money is what you can afford to spend for a car payment each month.
Even if you’re approved for a higher amount, stick to what you know your budget says you can afford for the best results.
Get Preapproved
It will be easier to car shop more realistically if you are preapproved for your car loan before shopping. Wherever you’re getting your car loan from, talk to them about their preapproval process. With bad credit, it’s often impossible to get approved by your bank. In these cases, your car salesman might be able to give you some suggestions that will help.
Getting preapproved gives you a set amount you can work with, which will make it easier to find a car you can afford in the long run.
Reduce the Amount You Need to Borrow
One of the best ways to get the loan you’re going for is to reduce the amount of money you need to borrow to get your car. Unfortunately, bad credit makes it hard to get a higher amount, as you’re considered a risk when it comes to repaying the loan. Here are a couple of ways to successfully reduce the amount you need to borrow.
A Larger Down Payment
Most lenders will require you to have a down payment. The larger the down payment made, the cheaper your car payment will be, and the less money you’ll have to borrow. In addition, the larger down payment will offset taxes, interest, and fees and may even broaden the variety of the type of car you can afford.
Make a Trade
Another way to lower the amount of money you need to borrow is by trading in your existing car, if you have one. However, don’t just take the car to a dealership and take their first offer. Instead, take the time to do your research and look up the blue book value on your possible trade-in.
Websites such as Edmunds and Kelly Blue Book are reputable and will give you accurate prices. Be prepared to negotiate with the salesman to get the most for your trade-in, as that will help you get the car you want in the long run.
Try to Avoid Buy Here, Pay Here
We’ve all heard of buy here, pay here car lots, and while they have their place, you want to try to avoid them if you can. Many of these car lots don’t check credit at all, which is a good thing. However, they also have reputations for being overpriced, taking advantage of customers, and selling less than stellar quality cars.
If you decide to purchase from a buy here, pay here car lot, do your research and ask for references before making a final decision.
Skip the Extras
While it might be tempting to go for the stereo system, sunroof, and leather seats, they’re just going to drive up your payment and how much money you need to borrow. Skipping the extras can sometimes be the difference between getting a car and getting no vehicle at all.
After you’ve straightened your credit out is the time to purchase a car with the extras, not when you have bad credit and need a car to drive.
If your loan price includes the extras, then go for it. If not, skip them for now in favor of a lower payment.
Examine All Paperwork
Never just hand over your down payment and sign the paperwork without reading it first. Documents for loans can be confusing, but your name, money, and credit are on the line, so take the time to read and understand the paperwork in front of you.
Make sure that everything in the paperwork is the same as what the dealer agreed to when you started talking about the car you want to purchase. Reading over the paperwork only takes a little time and may save you a lot of heartache down the line.
Getting a Car with Bad Credit Made Simple!
As you can see, getting a car with bad credit isn’t as hard as it might seem. Follow the tips and hints above, and you’ll be driving off the lot in a new car before you know it.
If you’re ready to secure your loan for a car, contact us today for help and a quote.