When you apply for a car loan, one of the factors lenders consider is your credit score. If your credit score falls below 670, it is considered poor. A person with a poor credit score may not be eligible for all types of car loans. Or they might be charged more interest for the loans they can get. However, if you do your research and you plan correctly, you may be able to find a loan that’s right for you. Here are five tips to help you get a car if you have bad credit.
1. Try to Improve Your Credit
This might seem like a no-brainer. However, many people with bad credit feel like there’s nothing they can do to improve their credit. But this is not always the case.
The first step is getting a free copy of your credit report. This lets you know what lenders will see when they look at your credit. If you pull a credit report well in advance of trying to purchase a car, you give yourself some time to try to resolve some of the issues impacting your credit score.
One thing you can do is reduce your debt as much as possible. This can improve your credit utilization ratio. Also, try to pay your bills on time. Payment history is a significant aspect of keeping your credit record spotless.
2. Determine How Much You Can Afford
When trying to get a car with poor credit, you want to consider the amount of money available for the down payment and your monthly car payments. Your credit history will limit the size of the car loan you can get.
And getting a car with a high-interest rate will make that amount even lower. You could offset taxes, fees, and interest if you can afford a decent down payment. This will increase the selection of vehicles you can choose from.
3. Get Preapproved for a Loan
When preapproved for a loan, shopping for a vehicle with confidence is easier. This is because you know how much money you have to work with. You may want to talk to your bank or credit union about getting a car loan and learn about the preapproval process.
If you cannot get approved for your car loan by the bank, talk to your car salesman and see if they can connect you with a lender specializing in bad credit car loans.
4. Read All the Paperwork
Loan documents, especially loan documents for individuals with bad credit, can be long, wordy, and confusing. But your money and your future FICO score are at risk. So you need to understand the terms of the loan altogether.
Make sure that you don’t just sign on the dotted line in your enthusiasm to be approved for a loan. You should ensure that the paperwork matches exactly what the dealer or the lender agreed to do.
A word of caution is that some unscrupulous dealers will let a person drive away without signing on the dotted line. Then they’ll call you back to sign the papers, but the terms of the loan are completely different from those you agreed to initially. So don’t allow yourself to be fooled.
5. Watch Out for Scams
People with low FICO scores are often targeted for scams. Protect yourself from predatory loans. No matter how much you want or need a new car if something sounds too good to be true, it usually is.
Sadly, scams will offer loans that end up poorly for the car buyer. You will end up out a lot of money, without a car, and in debt. Your score will also have another blemish. No matter how eager you are to get a new vehicle, take your time and gather the facts. You want to make a financially sound decision.
A Bad Score Does Not Mean You Can’t Get a Car
It is easier for a person with good credit to get a car loan. A person with poor credit will face several challenges. But if you plan correctly, you can still get a good car. If you finance your vehicle and pay off your car loan promptly, it can help your trustability and make it easier for you to get the car you want next time.