Being held back by your bad credit score can be frustrating, especially when you need a car to get to your job. Those three numbers of your score are determined by whether you pay your bills on time and how much debt you have. Sometimes your credit score can be so low that you feel as if you’ll never get a car.
But what if we told you that you can still get a new car with bad credit? We have listed 6 quick steps that will help you overcome the obstacles.
Step 1: Know Your Credit Score
Before you can consider buying a new car with bad credit, you first need to know your credit score. By researching how bad your credit score really is, you’ll understand how it will look to a lender. As a result, you’ll be more prepared when it comes to negotiating. There are apps that you can use to monitor your credit score.
Even if your credit score is really high, it’s important not to view it as a negative aspect in the process. If you can show lenders that you are capable of closing your credit, even in small amounts, this may give them more confidence to loan you the money.
Step 2: Consider Your Monthly Budget
You need to consider how much of your monthly expenses you are willing to allocate towards your car payments. By writing up a monthly budget, you’ll be able to see what expenses are your priorities, such as rent or food. This task shows you how much money you have left over for your car repayment.
If you show this plan to a lender, along with your updated financial documents, you’ll be able to validate that you can pay back your loan. You’ll also be able to discuss exact monthly payments which will make negotiating plans easier. As a result, you’ll have better chances of financing a new car at the lowest rate.
Step 3: Prequalify for A Loan
The first step you should take before putting an offer down on a car is prequalifying for a loan. If you owe a lot of money, the lenders are less likely to give you loans, but you can send your application to a variety of trustworthy lenders.
Research for Reliable Lenders
It’s important to research lenders beforehand to ensure that you get the best deal and that there’s nothing underhanded happening at that vendor. Examining the average interest rate for car loans and bad credit auto loans will also help with your decision.
If you send your application to a variety of lenders, with proof that you’ll be able to pay back the loan, your chances of success are higher. You should even consider prequalifying with a Credit Union because they’ll be more open to lending money to one of their members.
Step 4: Find the Right Car
Everyone wants a good car, but this doesn’t mean that everyone can afford one. Now that you have an estimate for a loan, you’ll have a better idea of what type of car you can afford. This entire process requires a lot of research, and looking for your car is no different.
Do not pick the first one that catches your eye. It’s important to keep looking around until you find the best possible deal for your loan. This might mean that you’ll have to settle for a car that’s smaller or less powerful than you hoped for, but any vehicle that gets you from A to B is worthwhile, right?
Keep in mind that searching a trustworthy car dealer is as important as finding a fair lender.
Step 5: Plan A Down Payment
Unfortunately, most lenders require a down payment so it’s important to have money on hand so that you can afford initial costs. Showing your lender that you can afford the initial payments will also help build a foundation of trust.
Step 6: Seal the Deal
Once you’ve found the best online auto loans and a car that suits your budget, it’ time to seal the deal. Make sure you read all contracts carefully to ensure that there are no scams and that all parties are in agreement. It’s also worthwhile to negotiate a long term payment plan for in case there are some months that you cannot meet the deadlines.
Finally, now that you have a car, remember to keep up with your payments so that your credit score doesn’t dip. Another tip is to resist trading in your vehicle in the future until it’s paid off so you can prevent amounting more debt.
The Final Insights
As long as you make a determined effort to keep up with your payments, there’s nothing to stop you from buying a new car with bad credit. Hopefully, the advice we’ve given you will make the process a lot easier. It’s important to understand where you are financially and build a feasible plan based on that knowledge.
Don’t let your credit score hold you back. Are you ready to take the initiative?